Why The Market Is More Vulnerable Today Than At The Peak Of 2000 Or 2007 Bull-Market?

The S&P 500 (INDEXSP: .INX) is trading near its all time high majorly led by stocks that are trading at high Price to earnings ratio. Charles Rotblut from American Association of Individual Investors, was on CNBC Monday if the markets are overvalued at current juncture.

PE At All Time High

According to Rotblut there are a lot of worries about macro environment currently, but “right now a lot of people are also looking at the bull market being at 6 year, looking at valuations.”

He continued, “We are looking at PEs being higher now than they were either at the peak of 2000 or the peak of 2007 bull-market and that’s creating some captiousness as well, in addition to some of the volatility that we have seen this year so far.”

Data Source

Rotblut was asked that what data was he is using for his valuations and if it has been adjusted. He replied, “We are using adjusted numbers. Our data comes from Reuters, it’s about 20 and I look at the median PE and that’s for all stocks in the U.S. exchanges. So, not just S&P500 […] looked at about 7,000 stocks.”

Factors Apart From PE

He agreed to the point that in secular bull markets PEs do touch 20 levels, but he feels “that’s one thing, gross margins right now are higher as well. They are running at about 40 percent. So, I think the low inflation, low-interest rates are definitely helping."

“Certainly, if we get to a situation where inflation is higher that would […] cost of goods sold. If we have high higher interest rates that would affect operating margins, so, that would definitely change how we look at things,” Rotblut concluded.