S&P 500 and Sector P/E Ratio Charts

The most recent downturn for the S&P 500 has caused its P/E ratio (trailing 12-month) to drop from nearly 16 to 14.74.  As long as earnings remain strong, the P/E ratio for the S&P will continue to dip when the market dips.  As shown in the chart below, the S&P's P/E ratio is currently at about the same level that it was at a year ago.  Over this time period, the index itself has risen by 15%, so earnings have grown by that much as well, which is a good thing.  Typically during bull markets, you see P/E expansion because price increases at a faster pace than earnings do.  While we did see P/E expansion early on in this bull market, we have seen contraction over the last year and a half as earnings have grown.

Below is a table showing the current P/E ratios of the ten S&P 500 sectors.  We also provide what the average P/E ratio has been for each sector since the start of 2007.  As shown, the Financial sector's current P/E is the farthest below its average P/E ratio since '07 at -6.27.  Technology's current P/E ratio is also quite a bit lower than its average P/E.  Only three sectors currently have P/E ratios that are higher than their average levels over the last four and a half years -- Industrials, Energy, and Telecom.

Below we provide charts showing the P/E ratios for the ten S&P 500 sectors going back to 2007.  We also provide the price of each sector so you can see how the "P" in the P/E ratio has changed and affected valuations.  The Technology sector's P/E probably stands out the most since it is at its lowest level since early 2009 even though its price is up significantly.