The S&P 500 just passed its highest valuation level in almost 18 years

Key Points
  • The S&P 500 valuation on Wednesday passed 19 times forward earnings, the first time it has hit that mark since May 2002.
  • The landmark comes with the index up more than 400% off its March 2009 lows.

Market valuations continue to get richer as the bull run nears its 11-year anniversary, with one measure at its highest point in nearly 18 years.

As of Wednesday, the S&P 500 traded at 19 times 12-month forward earnings, the highest the P/E level has been since May 23, 2002, according to FactSet calculations released Friday. While that is high compared to historical averages, it still sits below the 20-year peak of 24.4 set on March 24, 2000, just before the dotcom bubble burst.

Market move is a natural reaction to coronavirus outbreak: Paul Christopher

The number is well above its most recent trends. The current P/E level has eclipsed the five-year (16.7), 10-year (14.9), 15-year (14.6) and 20-year (15.5) averages, FactSet reported.

Nine of the 11 S&P 500 sectors have valuations higher than their 20-year averages. The only group below is energy, while real estate was only recently carved out as a sector so it does not have that long a history.

The jump in valuation has come as the large-cap index recently eclipsed a 400% gain since its March 2009 low as the financial crisis was coming to a close.

FactSet analysts note that the valuation level would be higher were it not for Wall Street expecting record earnings over the next two years.

Billionaire Ray Dalio has two pieces of advice for the average investor