Contracting P/E Ratio Means This Bull May Still Have Legs

Includes: IVV, SPY
by: Bespoke Investment Group

Below we highlight the p/e ratio of the S&P 500 at the end of bull markets going back to 1942.

The lines in the scatter chart represent the change in the p/e from the start of the bull market to the end of the bull market. Red dots indicate p/e expansion and green dots indicate p/e contraction.

The current bull market is different than any other on record because there has actually been a large contraction in p/e ratios. At the start of this bull in October 2002, the p/e of the S&P stood at 29.06. It is currently at 17.84. There have only been two other bulls that saw contractions, but they were very small. This data bodes well for those arguing that this bull still has legs.

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