S&P 500 at record high leaves valuations stretched

Markets rose last week, with the S&P 500 closing above 2,500 for the first time.

In a report highlighting some of the statistics behind the rally, Bloomberg noted that US stocks have not had a 5 percent correction in more than 400 days. In addition, the S&P 500’s 269 percent rally since the 2009 low is the third strongest ever.

However, in the process, US stocks have become expensive. Bloomberg noted that at 19 times forecast earnings, the S&P 500 is trading at the most expensive level since the dot-com era.

A quarterly review by the Bank for International Settlements published on Sunday noted the same.

“Equity market investors used record amounts of margin debt to lever up their investments, even though price/earnings ratios indicated that equity valuations might be stretched by historical standards,” the BIS reported.

The BIS added: “And there were some signs of search for yield in debt markets: issuance volumes in leveraged loan and high-yield bond markets rose while covenant standards eased.”