Valuation
Low P/Eratios (less than 15) indicate attractive pricing where high P/E ratios (say more than 25) indicate expensive pricing.
If you look under the black heading of “Valuation (P/E Ratio)” in the table above, you will see that the price earnings ratio falls from high to low in the bad periods and rises from low to high in the good periods. Multiples (P/E ratios) expand (prices rising faster than earnings) in good periods as investors invest for momentum and not for fundamentals. Multiples compress in bad periods (prices fall more than earnings) as the past good period is attenuated and fundamentals (low P/E ratios or high dividends) are needed to attract equity investment.
In the most recent period 8, the P/E ratio has risen to an all-time high level; over 32x in recent days. Stocks have never been more expensive.