S&P 500 Price/Sales Ratio At All-Time High

We present below a chart illustrating yet another metric demonstrating that the valuation of the S&P 500 is ta all-time highs despite the presence of a global recession and pandemic that has yet to be contained.

The price/sales ratio is a useful measure of valuation because earnings (the ultimate determinate of business value) is a direct result of sales. Even the highest margin businesses will be unattractive investments if the sales level is low or the price/sales ratio is elevated.

The current price/sales ratio easily exceeds the high levels reached at the peak of the internet bubble.

The result, in our opinion, is a very high-risk market environment. We discuss our risk calculations at length in the recently published February issue. We also update our views on global markets, our current investment positions, and our methods to optimize risk/reward.

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