The Weekly Update 7/11/2025™
Fact versus Fiction
The chart below is measuring the Price to Earnings Ratio, (P/E Ratio) for the Equal Weighted Standard and Poor’s 500 companies.
A P/E Ratio is a commonly accepted measure of risk. The higher the price to earnings of the companies, the higher the risk. For reference purposes the market crash of 1987 started from a P/E ratio of 24x.
“The S&P500 is a “weighted Index”. This means the largest companies, think Apple or Microsoft, are given more performance, up or down, in the daily valuation. So, this chart removes that significant impact as it measures the P/E ratio of all 500 companies equally.
Check it out.
This chart goes back to just before Covid hit. The P/E was 17.6X. Note to self, well below the crash levels of 1987 at 24X! Then observe that we now rest at a risk rate of less than before Covid at 16.9X.
All the fear headlines and lies the press spews out in order to hold our eyeballs long enough to sell us whatever they are selling has cost those who listened dearly. Like +150% upside on the S&P 500 since the Covid lows.
Not only that, but per the above chart, we rest at arguably an inexpensive valuation, at least on this equal weighted measuring tool.
This is just another reason we at TWSG are very careful about what we read and listen to. It is also why our fact-based source cited, and quantifiable Seven Signs of a Changing Economy™ are our weathervane. The Seven tell us every month which way the economic wind is blowing and how hard. (Read June’s Seven Signs Here)
Right now, the signs remain positive, just like the chart above. That being said, we "always” focus on “Five Year Money” (Read it Here), to smooth out the speed bumps. And, we all know there is a speed bump coming and we are prepared if and when it arrives.
I’m interested in your thoughts, comments and observations. Feel welcome to call, email, or stop by the office and say Hi.
Respectfully,
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
*The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Investing involves risk. Loss, including loss of principal, may occur. No strategy assures success or protects against loss. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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