Daily Brief - The right P/E for S&P 500

TLDR

S&P 500 is closer to historical ‘fair’ value at 14x P/E. Compare with the current 17x and you get the sense that it’s early to call for value.

See further down for our Thursday market checklist.

Data you must watch

In volatile markets, you want to keep an eye on positioning and valuations.

Let’s start with the latter: the P/E of SPX is tightly linked to the yield of bonds, especially as we shift gears into the hiking cycle. With rates going up by 50bp each Fed meeting, expect the P/E to keep grinding lower as money shifts into bonds.

In terms of positioning, we keep seeing attempts to play the rebound. We watch for the market to offer us a nice “short” reading to call to an end of the selloff.

In conclusion?

It’s early to call for value in SPX but don’t forget fundamentals: economic growth is strong and earnings are rising.

Show me the data

Here are the links to all the data points discussed above:

• Growth. US Citi Economic Surprises / Learn ↗
• Growth. US ISM New Orders / Learn ↗
• Inflation. US Citi Inflation Surprises /Learn ↗
• Inflation. US ISM Input Prices (M) / Learn ↗
• Earnings. SPX Forward Earnings / Learn ↗
• Valuations. SPX Forward P/E / Learn ↗
• Valuations. SPX Equity Risk Premium / Learn ↗
• Positioning. SPX Positioning / Learn ↗