March 28, 2013 at 18:00 PM EDT
Is the US Stock Rally a Bubble?
US stocks are off to one of their best starts in years. Most indices are up 10% year to date, prompting many investors to ask: “Are we in another bubble?” The answer is no, at least when it comes to equities. Here are three reasons why: Most metrics suggest US stock valuations are at or below their long-term average. US large cap companies are trading at 2.25x book value and 15x trailing earnings, both valuations below the historical average. Not only are valuations below average, they are well below peaks reached in 2000 and 2007. By way of comparison, US equity markets were trading for 3x book value in 2007 and 5x in 2000. On a relative basis, even after the recent rally, US stocks still look cheap. The earnings yield on the S&P 500 is at a 30-year high relative to the yield available on an investment grade bond [...] Click here to read the original article on ETFdb.com. Related Posts: No Related Posts
US stocks are off to one of their best starts in years. Most indices are up 10% year to date, prompting many investors to ask: “Are we in another bubble?” The answer is no, at least when it comes to equities. Here are three reasons why: Most metrics suggest US stock valuations are at or below their long-term average. US large cap companies are trading at 2.25x book value and 15x trailing earnings, both valuations below the historical average. Not only are valuations below average, they are well below peaks reached in 2000 and 2007. By way of comparison, US equity markets were trading for 3x book value in 2007 and 5x in 2000. On a relative basis, even after the recent rally, US stocks still look cheap. The earnings yield on the S&P 500 is at a 30-year high relative to the yield available on an investment grade bond [...]

Click here to read the original article on ETFdb.com.

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