Monday, May 2, 2022

Nasdaq 100 valuations return to pre-pandemic levels

The P/E ratio of the Nasdaq 100 has returned to pre-pandemic levels. In theory, that would indicate all the steam has been let out. But think back to the conversations investors were having in late 2019 and early 2020. It bore a resemblance to the same issues being talked about now: extreme valuations, a slow down in growth, a tight labor market and a prolonged rally thanks to Fed support.

If those concerns were surfacing at pre-pandemic valuations, then returning to those levels doesn't necessarily bolster the bull case as is the instinct to do. (Especially with the same issues.) Instead, it signals there may be more selling as markets recalibrate.

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