It may not feel like it, but stocks are actually more expensive than they've been since 2005. Still, most investors say that shouldn't be a huge cause for concern.
The S&P 500's price-to-earnings ratio, which compares the price of the S&P to analyst projections of what S&P companies will earn over the next 12 months, has risen to 16.6, according to FactSet. Not only is that above historical norms, but it is the highest that metric has been since March of 2005.
What's unusual is that stocks have gotten more expensive in terms of valuation, even as the market itself has been relatively stagnant: The S&P has logged only mild losses on the year through Friday's close.
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That's because earnings estimates have fallen dramatically of late. In fact, from the end of the year until now, analysts have decreased their estimate for what S&P 500 companies will earn over the next year by nearly $3, or 2.2 percent. So even as the price/earnings (P/E) equation's numerator has stagnated, earnings have fallen.
Unsurprisingly, much of the decline in earnings expectations comes from energy sector analysts, who are still reeling over oil's 50 percent plunge from its 2014 highs. From the end of the year, earnings per share estimates for the energy sector have swooned 27 percent.
Since share prices haven't fallen nearly as much, the overall impact is that the P/E for the energy sector has risen to 22.4, FactSet senior earnings analyst John Butters finds—the highest for any sector in the S&P.
The cuts have indeed come fast and furious. For instance, when Credit Suisse downgraded Exxon Mobil on Friday morning, it slashed its 2015 EPS estimate for the oil giant from $5.04 to $2.82.
Still, the stock is down just 13 percent over the past six months, which gives a flavor of the dynamic in the energy sector that has sent valuations way higher.