Price gains of stocks in the Standard & Poor's 500 Index areoutpacing profits by the fastest rate in 14 years as the bullmarket extends beyond the average length of rallies since Harry S.Truman was president.

The benchmark gauge for U.S. equities has risen 14 percentrelative to income over the past 12 months—to 16 timesearnings—according to data compiled by Bloomberg. Valuations lastclimbed this fast in the final year of the 1990s technology bubble,just before the index began a 49 percent tumble. The rally thatstarted in March 2009 has now outlasted the average gain since1946, the data show.

Bears say the failure of earnings to keep up with prices signalsthe bull market is in its last stages, as companies fromCaterpillar Inc. and Danaher Corp. forecast slower profit growthand the Federal Reserve prepares to reduce stimulus. Optimistspoint to expanding multiples as proof individual investors aregrowing confident enough in the economy to return to stocks.History shows the final phases of rallies have provided some of thebiggest gains.

Continue Reading for Free

Register and gain access to:

  • Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
  • Informative weekly newsletter featuring news, analysis, real-world cas studies, and other critical content
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.