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The S&P 500 average price to earnings ratio is actually only at about 21, which is not an unusual level for the last 20 years. It's relatively high compared pr

The S&P 500 average price to earnings ratio is actually only at about 21, which is not an unusual level for the last 20 years. It's relatively high compared pre-1990 levels, but in comparison, during the 2009 crisis, the PE ratios blew through the top. I was actually surprised when I looked at it because, like you apparently do, I expected prices to be through the roof. As this crises continues, though, I suspect we'll see it creep up. People are burning through their limited savings. When that runs out, there will be a crunch -- I would imagine.

_delirium 7y ago
That's a 12-month trailing PE though, which has only a small amount of the covid disruption baked into it so far. The (unknowable) PE ratio calculated based on forward earnings might in reality be a lot higher if the "E" part is tanking (it did in 2008: 2008 S&P earnings were down 75% on 2007). Analyst estimates for what earnings will look like this year are all over the place, predicting anything from a 5% to a 40% drop in S&P earnings per share. If you side with a 5% drop, then the forward PE only rises to about 22. If you think a 40% drop is a good prediction though, that's looking like a forward PE of 35.
- tempsy 7y ago
  The market seems to be pricing in a full recovery. Anything less than a return to normalcy when it comes to demand or unemployment by end of year will send markets lower than now, I’d imagine...