by Wolf Richter
Wolf Street
With actual P/E Ratios Blowing Out Like this.
Just how overvalued are stocks, particularly small-caps? According to Wall Street, even the question is wrong. Stocks are never overvalued. They’re always a buy. The future looks bright. And even if it doesn’t look bright, analysts come up with “adjusted” earnings that are so brilliant that they blind even innocent bystanders. That’s how Wall Street justifies high stock prices.
Our miraculously visionary analysts see on average an “adjusted” forward P/E ratio for the next 12 months of 15.8 for the Dow, 16.5 for the S&P 500, 17.8 for the Nasdaq, and – get this – 16.5 for the Russell 2000, the small-cap stock market index that tracks the bottom 2,000 stocks in the Russell 3000.