Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by John Nelson, financial planner at NelsonCorp Wealth Management. Welcome back, John.
John Nelson:
Thank you for having me, Brandy.
Brandy Auterson-Hurst:
So there’s been some talk in recent years of a potential bubble in the stock market, especially in the tech sector. What are you currently seeing in the data?
John Nelson:
Yeah, there certainly has. A lot of discussion on that. You see the price of equity markets over the last few years in particular. We’re also seeing the S&P 500 right now trading about 14% above its forward price earnings ratio. And that’s the graphic I have with me today, the chart that I’ll go through. And what we’re looking at here is the chart breaks it down by sector to compare each one in the sector to its 10-year average. And what stands out here is that technology is only about 5% above its long-term average, even though that’s talked about an awful lot by investors and, obviously, one of the lowest on the chart. What’s also interesting and telling about the past decade is you look at the market overall, the sectors, energy, industrials, the margins have been much greater, and they have not seen the earnings to back up some of those numbers. So those are the big items that stand out. Technology maybe not quite as stretched as many think.
Brandy Auterson-Hurst:
Okay. So, what should viewers take away from this?
John Nelson:
Yeah. I think just that, that many other sectors have actually seen far more in terms of being stretched and maybe overvalued at this point in this market cycle. Tech, when compared to the averages and when considering the overall earnings that have backed up those prices, maybe a bit less stretch than many are talking about at this point.
Brandy Auterson-Hurst:
All right. As always, John, thanks for joining us.
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