Chart Content: Rolling 12-month S&P 500 valuation based on realized earnings.
Chart Significance: The recent volatility in the S&P 500 has resulted in valuation downside that remains three times (3x) the pace of that experienced during the technology bubble in the early 2000s. Such a quick pace to the current correction has provided a sobering reality that the technology heavy S&P 500 may have experienced a mini bubble burst.
Potential Forward-Looking Implications: Further volatility within global capital markets remains possible and may be warranted in the event of unforeseen geopolitical events. The uncertainty of near-term inflation has also plagued sentiment as recent data indicates that headline inflation may have peaked in June but core inflation continues to rise. Even with such events on the backdrop, however, the sustained health of U.S. consumers, along with a notably severe valuation downside to the S&P 500, there appears to be a tangible light at the end of the tunnel. It remains difficult to envision sustained downside volatility within a labor market backdrop that has failed to show signs of stress, as is the case with aggregate consumer demand for goods and services. This isn’t to say that it won’t happen, but we would argue that the probability has significantly diminished. It’s also exciting to note that valuation opportunities remain visible within all aspects of global equity markets. This has historically resulted in net new cash to enter equities.
Investment advice offered through CX Institutional, a registered investment advisor.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in the presentation may not develop as predicted.
All data is sourced from Bloomberg, through the release of monthly figures from the U.S. Bureau of Labor Statistics or from the Federal Reserve and any of its affiliated regional locations.