The main consequence of the current investor craze for equities is elevated price levels. The S&P 500’s P/E ratio is now 25, indicating very high valuations. However, this overall figure hides strong disparities between sectors. For example, Consumer Discretionary and Energy have a P/E of 36 and 32 respectively, while the Financials sector is trading on a P/E of 13. Valuation is a risk that needs to be given serious consideration.
Source: Bloomberg, Unigestion. Data as at 31 January 2021.
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