NDR: Price-earnings ratios still above average

The stock market is one of the few places where buyers panic during a sale—but even after the Liberation Day selloff, S&P 500 valuations didn’t drop to bargain levels. Though the forward P/E fell 14% and trailing P/Es dropped about 20% from their November 2024 highs to April 2025 lows, all three remained above long-term averages (chart above). The forward P/E bottomed at 19.2 (vs. a 40-year average of 15.5), with trailing operating and GAAP P/Es at 21.3 and 24.1, respectively—still elevated. Like stores that mark up prices before offering a “sale,” valuations looked cheaper, but weren’t. Much of the limited decline in the forward P/E reflects falling earnings estimates, particularly for the first half of 2025, with Q1 EPS forecasts down 4.7% and Q2 down 2.9%, while Q4 remains flat.

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