The coronavirus pandemic will be remembered for many things, one of which being the speediest stock market recovery in history. If you had bought a S&P 500 index fund on 23 March – the bottom of the COVID-19 crash – you would have made more than 32% to date. The extreme market rally has left many wondering if it’s now too late to get in the game of investing.
From a valuation perspective, stocks do seem to be pretty expensive right now. According to data from Factset, the S&P 500’s forward 12-month P/E ratio is 21.9. This widely followed valuation metric is significantly above its five-year average of 16.9 and its 10-year average of 15.2. And over the past weeks, we’ve seen the S&P 500 and the tech-heavy Nasdaq consistently hit all-time highs
It doesn’t matter that the market is at an “all-time high”
If investors are supposed to “buy low, sell high”, then the current environment is a terrible time to invest, right? Absolutely not!