S&P 500 P/E
What it is
Aggregate price-to-earnings ratio of the S&P 500 on the last 12 months' earnings. Simple measure of how much one collectively pays for $1 of US broad market earnings.
How to read it
Historical average is around 16x. Above 20x, the market is expensive (but can stay so for long). Below 14x, it's generally capitulation or a moment to buy aggressively — historically preceded by sharp multiple compression.
Common reference points
- Bargain< 14x
- Historic norm14 – 20x
- Expensive20 – 25x
- Very expensive — bubble?> 25x
Orders of magnitude, not a rule: the same number does not mean the same thing from one sector to the next.
What it does not tell you
Trailing P/E can be misleading after an earnings crash (P/E explodes), or at peak margins (P/E looks low but margins unsustainable). Compare to Forward P/E (analyst estimates) AND Shiller CAPE for a triangulated view.
Other measures — Macro — valuation
Educational content. Polaris is not a registered investment adviser and makes no recommendation.