The recent pullback in the S&P 500 has deflated the forward P/E to 20.1 as of close last Thursday, which is in the bottom of the post-COVID Crash recovery range. The P/E derating is not surprising as bond yields have risen to put downward pressure on P/E ratios.
What's next? The upcoming Q3 earnings season will be a test for both bulls and bears. The key question for investors is whether the E in the forward P/E ratio rises fast enough to support stock prices and offset rising rates?
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