AS FIRMS in the benchmark Standard & Poor’s 500 begin to release lackluster second quarter results, rich valuations threaten to keep the US stock market spinning in place.
At 16.5 times forward estimates, the S&P 500 is about 10 per cent more expensive than its historic average of 15, according to Thomson Reuters. The price to earnings multiple recently hit its highest level since 2004.
Elsewhere, the performance of European stocks, and to a lesser extent, US companies, in the near term may once again be affected by events involving Greece.
The outcome of an emergency Eurozone summit yesterday has boosted the odds of some kind of exit by Greece from the Eurozone, and it could create more turmoil in equity markets as investors move to safer assets like government debt.
The overall effect on the US economy and US markets is seen as small for the long term, however.