Where are markets heading with nosebleed valuations: Pete Wargent

Where are markets heading with nosebleed valuations: Pete Wargent
Pete WargentDecember 17, 2020

EXPERT OBSERVER 

The Crestmont P/E is still levitating 119 per cent above its arithmetic mean, and remains close to the highest level in history at 33. 
 
During the tech bubble/bust the Crestmont P/E rose above 25 (denoting 'irrational exuberance') and momentarily touched the current record high of 33.7 before promptly crashing.
 
In 1929 ahead of the Wall Street Crash and the Great Depression the Crestmont P/E peaked at 26.4.
 
And before the subprime financial crisis it peaked at 24.7.
 
Here's the chart update until today:
 
Source: Advisor Perspectives
 
Earnings reports will be interesting to follow this year given that there's been a severe disruption to global economic activity in 2020. 
 
Back in Australia earnings expectations have been revised dramatically lower, for five sectors in particular:


Source: Morgan Stanley
 
Markets are forward-looking of course, but this puts PE valuations for the ASX 200 at extremely lofty levels. 
 
Source: Morgan Stanley

This would not be a good time to disappoint markets with an earnings miss, you'd think.

Pete Wargent is the co-founder of AllenWargent property buyers and a best-selling author and blogger 

Pete Wargent

Pete Wargent is the co-founder of BuyersBuyers.com.au, offering affordable homebuying assistance to all Australians, and a best-selling author and blogger.

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