Multiples Growing Fastest Since Dot-Com Bubble

U.S. equities are valued at 16 times earnings, 14 percent higher than a year ago. Bears see this as an sign the market is about to head downward.

Price gains of stocks in the Standard & Poor’s 500 Index are outpacing profits by the fastest rate in 14 years as the bull market extends beyond the average length of rallies since Harry S. Truman was president.

The benchmark gauge for U.S. equities has risen 14 percent relative to income over the past 12 months—to 16 times earnings—according to data compiled by Bloomberg. Valuations last climbed this fast in the final year of the 1990s technology bubble, just before the index began a 49 percent tumble. The rally that started in March 2009 has now outlasted the average gain since 1946, the data show.

Birinyi, one of the first money managers to advise clients to buy in 2009, wrote in a Aug. 7 report that the rally in U.S. equities was poised to slow after the 17 percent surge this year. He predicted that the S&P 500 may climb to a new high of 1,740 by December, 4.6 percent above the current level. The S&P 500 exceeded Birinyi’s forecast of 1,600 in May.


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