Equity multiples growing at fastest rate since dot-com bubble

Today's commentary
Summary: The gain in equity prices is now outpacing profits at a rate not see since the heady dot-com days. In fact, on a GAAP accounting basis, profits have been falling. I believe this creates a dangerous situation in view of rising interest rates and market turmoil.

I have talked about multiple expansiona lot in the past few weeks because the US market’s advance is predicated on multiple expansion.The statistic on the gain in share prices outpacing earnings comes from a Bloomberg article yesterday. Here are some illuminating details:

Price gains of stocks in the Standard & Poor’s 500 Index (SPX) are outpacing profits by the fastest rate in 14 years as the bull market extends beyond the average length of rallies since Harry S. Truman was president.
The benc...


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