There’s more to the global stock indices than meets the eye

Written by: Cornelius Zeeman, Portfolio Manager at Fairtree Asset Management.
12 June 2020

Valuations are relative

As a result of the S&P 500’s recovery of 42.7% from its lows leaving it -0.3% year-to-date, there are many articles out there flagging that the US market is trading at lofty valuations when looking at its price earnings (P/E) ratio. The Price/Earnings graph (Graph 1) below shows that the S&P 500 (blue line) is trading on a forward PE of 22.5x, which last happened in 2000. It is also trading at a record premium (grey area) of 57% versus Emerging Markets (orange line), trading on a more palatable 14.3x.

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