wsj.com/amp/articles/stocks-are-way-down-theyre-still-expensive-11652500809
The S&P 500 still has plenty of room to fall, if history is any guide. Wall Street often uses the ratio of a company’s share price to its earnings as a measuring stick for whether a stock appears cheap or pricey. By that metric, the market as a whole had been unusually expensive for much of the past two years.

Wall Street often uses the ratio of a company’s share price to its earnings as a measuring stick for whether a stock appears cheap or pricey. The S&P 500 traded late this week at 16.8 times its projected earnings over the next 12 months. The market as a whole had been unusually expensive for much of the past two years.

The S&P 500’s decline through Friday is its worst year-to-date performance since 1970. That is still above the average multiple of 15.7 over the past 20 years, but down from a recent peak of 24.1 in September 2020.

Some investors worry that the market’s expectations for corporate earnings are too high. Michael Mullaney, director of global markets research at Boston Partners, says he thinks the S&P 500 is fairly valued. The valuation of equities tends to fall during tightening cycles, Mullaney says.
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