Stocks are More Overpriced than They Have Been in Decades
January 16, 2020
We all know you have to spend money to make money, but in the current stock market, you have to spend more than you have in years. What investors are willing to pay for stocks relative to their long-term earning potential is higher than it has been in decades, if not longer.
The PEG ratio, which tracks price/earnings to growth, currently sits at 1.8, the highest level since Bank of America began tracking the ratio in 1986. Generally, a PEG ratio above 1 means that stocks are overvalued. This suggests that either prices will need to come down or earnings will need to go up.
A more simplified price-to-earnings ratio currently sits at 18.4, the highest since 2002.