US Stocks Are Highly Valued Relative to Historical Average: Chart

US stocks continue to remain elevated since the beginning of the year and the elections. Stocks in certain sectors such as financials have soared substantially since the elections.This week the tech-heavy NASDAQ crossed the record 6,000 mark. Despite the superb performance of US equities, investors need to be cautious since the P/E ratio of US stocks look steep relative to historical average and when compared to other markets.

From an article at Allianz Global Investors:

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The US Equity Market Is Highly Valued

The current price-to-earnings ratio of the US market is significantly higher than its 30-year average

Source: Datastream, MSCI, Shiller, AllianzGI as at 1 March 2017

The eight-year US equity bull market has time and again confounded its many detractors, helping US stocks remain among the top performers since the global financial crisis began. With such a history of strong results, it is easy to argue why many long-term investors should continue holding this asset class in their portfolios.

At the same time, the US equity market is highly valued – the current Case-Shiller price-to-earnings ratio of 29.8 is almost double its long-term average – leaving other investors to question whether this is currently the place to pursue growth potential and protect purchasing power.

Source: Six pressure points for US stocks, Allianz

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