Most Dangerously Overvalued S&P 500 in History
During the month of July, a record 10.08% of S&P 500 companies reached new all-time high enterprise value/revenue ratios. The previous record was set in March 2000 when 4.40% of S&P 500 companies reached all-time high enterprise value/revenue ratios. Over the following 36 months, the S&P 500 declined by 41.17%.
Even more insane is how a record 32.98% of S&P 500 companies currently have enterprise value/revenue ratios that rank in the 90th percentile or higher of their historical levels for the trailing 20-year period. This is more than three standard deviations above the long-term average of 10.17%. The last major spike occurred in June 2007 when it peaked at 16.29%. Over the following 36 months, the S&P 500 declined by 28.44%.
The median enterprise value/revenue ratio of S&P 500 companies has just reached a new all-time high of 2.94, which is nearly three standard deviations above the long-term average of 2.17. In March 2009 at the peak of the global financial crisis, the median enterprise value/revenue ratio of S&P 500 companies bottomed at a multi-decade low of 1.37, which was three standard deviations below the long-term average of 2.17. Currently, the S&P 500 is overvalued to the same extent that it was undervalued in March 2009.
As a subscriber to InterAnalyst, you should be aware that a market in this condition is likely to move swiftly when it does turn. For your financial security, we will have an eye on it and keep you informed in urgent fashion.
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