LIVE MARKETS-US stocks very expensive by one historical metric
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U.S. STOCKS VERY EXPENSIVE BY ONE HISTORICAL METRIC
U.S. stocks have retraced from record highs, leading many investors to ponder whether they are approaching attractive levels to buy. But by one historical measure, the cost of the S&P 500 .SPX remains very expensive.
As of Dec. 31, the number of hours of work that were required to purchase one unit of the S&P 500 was 208, the highest since 1947 and well above historical ratios, according to The Leuthold Group.
“While a steadily rising standard of living in the United States has increased workers' overall purchasing power, the rapid rise in equity valuations has significantly reduced stock market affordability over the 1947-to-date period,” Leuthold said.
Indeed, Leuthold notes that historically stocks are expensive in their upper three deciles, with the eight decile ranging from 66 to 82.6 hours, ninth decile from 82.6 to 106.2 hours and the tenth decile being 106.2 hours and above.
The median is also much lower than the current rate, at 33 hours, while the average is 51.5 hours. The data is based on the average hourly wage in the manufacturing sector.
(Karen Brettell)
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