With the S&P 500’s cyclically adjusted P/E ratio approaching levels last seen near the 2021 market peak, St. Aubin warns: “Any time you have high valuations, you should be on guard for surprises. The biggest risk is that all of this optimism is already priced into markets.”
As we head into the busiest week of earnings season—with 163 S&P 500 companies reporting—St. Aubin notes that companies don’t need to report poor numbers to see negative reactions: “The numbers don’t have to be bad, they just have to be worse than what had been priced in.”
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