Stock valuations at multi-year highs

The rally in stocks this week has resulted in valuations becoming even more stretched.

According to Zero Hedge, data from JPM Asset Management shows that the US stock market is now more overvalued than during the last bubble peak.

Similarly, Business Insider quotes FactSet’s John Butters as saying that the forward P/E ratio of the S&P 500, at 15.7, is now well above the 5-year and 10-year averages, although still below the 15-year average and not close to the higher P/E ratios recorded in the early years of this period.

“It is interesting to note that the forward 12-month P/E ratio would be even higher if analysts were not projecting record-level EPS for the next four quarters,” added Butters.

European stocks have also reached elevated valuation levels. According to Bloomberg, the STOXX Europe 600 is now trading at 15.7 times the estimated earnings of its members, the highest since 2009.

European stocks did fall on Friday while the US stock market was closed for the Independence Day holiday. The STOXX Europe 600 fell 0.3 percent.

Germany's DAX fell 0.2 percent amid some weak economic data on Friday. German factory orders fell 1.7 percent in May after rising 3.4 percent in April. Markit's German construction PMI fell to 45.5 in June from 48.1 in May.