Bloomberg Intelligence's 'Equity Market Minute' 6/3/2020

Gina Martin Adams discusses the S&P 500 valuation ratios, highlighting concerns about excessive optimism in stock prices. She examines forward PE ratios, noting that headline figures may be misleading due to cyclical pressures. Excluding certain high-earning stocks reduces the forward PE significantly. Additionally, she analyzes price to book ratios, revealing that over 60% of the index trades below long-term averages, especially in cyclically suppressed industries. The session concludes with a summary of these insights.

What is the primary concern investors have about the current stock prices in the S&P 500?

• Low dividend yields

• Lack of liquidity in the market

• Excessive headline multiples

• High interest rates

What is the forward PE ratio of the S&P 500 when excluding stocks trading above 60 times earnings?

• A 5% reduction

• A 10% reduction

• A 15% reduction

• No change

What is the main reason for the extreme headline forward PE ratio of the S&P 500?

• Long-term economic growth

• High inflation rates

• Short-term cyclical earnings pressures

• Increased market volatility

What percentage of the S&P 500 index has price to book ratios trading below the long-term average?

• More than 60%

• More than 70%

• More than 50%

• More than 40%

In which industries are many of the stocks with below-average price to book ratios found?

• Consumer goods

• Technology

• Healthcare

• Cyclically suppressed industries