Second quarter earnings season is starting, with valuations that are stretched from historical perspective. That makes this season particularly demanding, as companies need to present results and guidance that are up to expectations. In terms of Price to Earnings, on a 12 month trailing basis, the S&P500 is now trading at 26, which is about 40% richer than the 40 year average. Having said that, the average is not telling the whole truth as 493 companies are trading at 17X earnings, with the remaining mega caps distorting valuations. This market might still have some room to go, provided that earnings can keep growing.
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