Maybe She is Correct, Maybe She is Not Correct – Heck, I Don’t Know. Let’s See What Happens

The last time stocks were as “expensive” as they are right now was 15 years ago, right before the first bear market of the 21^st century – the so called “dotcom” bust.  So says Savita Subramanian, equity and quantitative strategist at Bank of America Merrill Lynch, writing that the current market valuation is near levels seen during the tech-bubble era.  She writes, “The S&P 500 median P/E [price-to-earnings ratio] is currently at its highest level since 2001 and that the average stock trades a full multiple point higher than the oft-quoted aggregate P/E. This puts it in the 91st percentile of its own history and just 14% from its tech-bubble peak.”  The key is the median (or middle point in a range) P/E ratio, which some analysts feel is a more reliable measure of total-market valuation than the aggregate P/E more commonly referenced.  The chart below is from her report.