PE Ratios

One positive argument for stock prices is their valuations.  Based on what we currently know about the economy stock prices look cheap.  Chart of the Day took a look at this recently.  Here's what they've noted:

"Today's chart illustrates how the recent rise in earnings as well as the the recent pullback in stock prices has impacted the current valuation of the stock market as measured by the price to earnings ratio (PE ratio). Generally speaking, when the PE ratio is high, stocks are considered to be expensive. When the PE ratio is low, stocks are considered to be inexpensive. From 1936 into the early 1990s, the PE ratio tended to peak in the low 20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s), surged even higher during the dot-com bust (early 2000s), and spiked to astronomical levels during the financial crisis (late 2000s). Currently, the PE ratio stands at a touch below 18 which is near the lowest levels that have existed since the early 1990s."

*Long ETFs related to the S&P 500 in client and personal accounts.

Link:  PE Ratios.