Stocks Are at Records, but Are They Expensive? These Models Have an Answer
Stocks are setting repeated highs, reigniting a perennial debate among investors about whether they are too expensive.The S&P 500 has climbed 5.4% to start 2024 and closed above 5000 for the first time Friday, its 10th record of the year. The Dow Jones Industrial Average has risen 2.6%, setting 11 records along the way.When trying to gauge whether a stock or index appears cheap or pricey, strategists recommend that investors use a combination of metrics, along with weighing the economic conditions, the overall financial health of a company and the industry's record. Investors are typically willing to pay more for companies they anticipate will expand rapidly than those whose growth prospects are more limited.Rising earnings are typically the most dependable fuel for sustained stock-price gains. During periods when stocks climb at a significantly faster rate than corporate earnings, concerns about a bubble often mount. Last year, for example, the S&P 500 rose 24%, yet profits were relat