The Pandemic And Stocks

Published May 15, 2020, 6 p.m. EST

The Standard & Poor's stock index closed Friday 2.3% lower for the week, and is 24.6% off the epidemic low of March 23. Amid the worst economic crisis in modern history, here's what it means to retirement investors based on a historical perspective and facts about earnings, which ultimately is what drives stock prices.

Historically, shares in America's 500 largest publicly traded companies are priced at a multiple of 16 to 19 times their expected profits. That valuation range of stocks in 'normal' times is shown in the two solid red lines. In recent weeks, the S&P 500 has been priced near the high end of the normal valuation range. The actual price of the S&P 500 is the black line.

The dashed red lines apply the historical valuation range, of 16 to 19, to the latest consensus earnings forecast from Wall Street's analysts surveyed by Thomson Reuters IBES. .

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This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.

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