Jakarta, CNBC Indonesia – The United States (US) Wall Street stock exchange opened higher at the start of trading today. Where one of the Wall Street indexes managed to touch the All Time High (ATH) again or its all-time increase.
In trading Friday (9/2/2024), the Dow Jones opened up 0.02% at the level of 38,731.97, likewise the S&P 500 opened higher or rose 0.07% at the level of 5,001.34, and the Nasdaq opened with an appreciation of 0. .31% at 15,842.38.
The S&P 500 Index continues to reach new milestones by breaking above the 5,000 level, reaching its latest high valuation.
The S&P 500’s forward price-to-earnings ratio, a commonly used metric for valuing stocks, rose this week to 20.4 times, a level last reached in February 2022, according to LSEG Datastream data. This puts it well above the index’s historical average of 15.7.
It’s not unusual for valuations to rise along with share prices, and equities can remain expensive for long periods of time before returning to more moderate levels. However, some investors believe that the index’s multiple growth has made buying in the broad market less attractive. The S&P 500 has surged 21% since late October, setting a new record high.
Prices briefly passed the 5,000 level at the end of Thursday’s session, before closing just below that figure.
“There’s nothing screaming that at 20 times price you should sell,” said Mark Hackett, head of investment research at Nationwide. “It’s just that you would obviously rather buy 15 times as much.”
Stock valuations have risen even as US Treasury yields have risen again this year, following a rethink on how soon the US Federal Reserve will start lowering interest rates.
Higher yields tend to depress equity valuations because they mean bonds offer more investment competition to stocks and the company’s future cash flows are valued less. This means stock valuations could rise further if the Fed makes the expected cuts and yields fall. The 10-year US Treasury yield was last in the range of 4.16%.
While a more optimistic outlook for U.S. stocks will help make valuations cheaper, earnings expectations for 2024 have remained largely steady this earnings season as companies have reported results. Companies in the S&P 500 are expected to increase earnings by 9.7% this year, according to LSEG data.
Peter Tuz, president of Chase Investment Counsel, has been looking this reporting season for companies with solid financial performance prospects and inexpensive valuations.
“The S&P 500’s valuation of about 20 times is a bit excessive and is based on earnings growth or a decline in levels that we probably won’t see until later this year,” Tuz told Reuters.
Disclaimer: This article is a journalistic product in the form of CNBC Indonesia Research’s views. This analysis does not aim to encourage readers to buy, hold, or sell related investment products or sectors. The decision is entirely up to the reader, so we are not responsible for any losses or profits arising from this decision.
(saw/saw)
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2024-02-09 15:35:00
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