Stock valuations are high, the financial media has been reporting lately. This is a topic I examine frequently and it is the subject of my recent weekly commentary On My Radar.
Over the course of the first quarter, Standard and Poor’s lowered its forecast for 2015 earnings from $135 to $112 to $110 per share. With prices already high relative to corporate earnings, such a trend is not an investor’s friend.
Let’s take a look at current valuations and see what they may tell us about the market’s return over the next ten years. Hint: it’s very low. Be prepared to adjust your sails.
The following chart, courtesy of Ned Davis Research, shows the market to be richly priced. Median P/E is my favorite valuation indicator.