Skip to main content

Market Overview

Carter Worth Thinks That The S&P 500 Is Overvalued

Share:

On CNBC's Fast Money, Carter Worth spoke about the valuation of the S&P 500 stocks and he concluded that they are overvalued.

Worth showed levels of the price to earnings multiple for several S&P 500 constituents in the last 10 years. Nike Inc (NYSE: NKE) is currently trading at P/E multiple of 29, which is above the prior peak in 2007, explained Worth. He also named Home Depot Inc (NYSE: HD), Costco Wholesale Corporation (NASDAQ: COST), Under Armour Inc (NYSE: UA), Monster Beverage Corporation (NASDAQ: MNST) and McDonald's Corporation (NYSE: MCD) as the stocks that are trading at or close to their highest price to earnings multiple values. Worth believes that these stocks should have lower price to earnings multiples and he doesn't think that there is going to be a significant growth in earnings.

When it comes to the S&P 500, it trades at a P/E of 17.4, which is above its long-term average of 16.1, explained Worth. A decline to 1,800 points in the S&P 500 would bring its P/E back to 16.1. It is also interesting that the index was trading above its up trend channel during 2014 and 2015. Worth said that when an asset overshoots the channel, it usually undershoots the channel after some time and that is why he thinks that the S&P 500 is going to trade below its long-term average P/E value and he sees it close to 1,680.

 

Related Articles (SPY)

View Comments and Join the Discussion!

Posted-In: Carter Worth CNBCMarkets Media