The $SPY forward P/E has dropped from 22.4 in mid-January to 17.8 now. That's a meaningful compression in just a few months.
Valuations don't move in straight lines. When multiples get stretched, they eventually mean-revert—sometimes violently, sometimes quietly. This is the quiet version so far.
What's interesting isn't the number itself. It's what it tells you about expectations. At 22.4, the market was pricing in perfection. At 17.8, there's room for disappointment without catastrophe.
Don't confuse cheaper with cheap. But recognize when the crowd has cooled off a bit.
Valuations don't move in straight lines. When multiples get stretched, they eventually mean-revert—sometimes violently, sometimes quietly. This is the quiet version so far.
What's interesting isn't the number itself. It's what it tells you about expectations. At 22.4, the market was pricing in perfection. At 17.8, there's room for disappointment without catastrophe.
Don't confuse cheaper with cheap. But recognize when the crowd has cooled off a bit.
