Eoin Treacy's view There has been some considerable discussion in the financial media concerning the extent to which fundamental valuations have expanded over the last six months and whether this represents a threat to the integrity of the medium-term uptrend on Wall Street. I thought this would be an interesting time to compare valuations on some benchmark indices with what they were back in November when this impressive rally began. Here is a link to the World Equity Index Valuations Table from November / December table.

The S&P 500 currently has a P/E of 15.99 and yield 2.11% In November Its P/E was 14 and it yielded 2.21%

The Nasdaq 100 currently has a P/E of 18 and yields 1.48%. In November its P/E was 16.1 and it yielded 1.22%

The FTSE-100 currently has a P/E of 16 and yields 3.81%. In November its P/E was 13.8 and it yielded 4.03%

The DAX Index currently has a P/E of 15 and yields 3.44%. Its P/E has not changed in more than six months while its yield has compressed slightly to 3.38%

The Hang Seng currently has a P/E of 10 and yields 3.36%. Last November its P/E was 11.29 and it yielded 3.24%.

The S&P/ASX 200 currently has a P/E 19 and yields 4.75%. In November its P/E was 17.4 and it yielded 4.78%.

From these comparisons, we can deduce that valuations have expanded somewhat. However earnings have more or less kept pace with price gains which helped moderate valuation expansion despite a significant rally for most of these markets. Nevertheless, the absolute levels of valuations could not be considered cheap following a multi-year advance.

The other interesting comparison is in dividend yields which in some cases have increased despite the fact prices have generally improved. (Also see preceding piece for more on share buybacks and dividend growth).

These figures suggest that equity markets have already priced in a good deal of earnings growth potential. While the availability of liquidity remains a tailwind over the medium-term, as valuations trend moderately higher earnings will need to come in at least in line with expectations if the bull market is to be sustained.

Please note: All data quoted above originates in Bloomberg. We realise that some of the data displayed is inaccurate for some indices, particularly where ADRs are included. However, I have endeavoured to remove those indices which were most problematic. We continue to publish these tables because the data is generally accurate and going forward we will continue to weed-out the less reliable data sets as subscribers highlight them for us. The P/Es quoted by Bloomberg are exclusively based on operating earnings.)