AWM Insights #25: Do Valuations Matter Anymore?

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4y ago 7:42

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Last Tuesday, the S&P 500 hit a record high after a sudden and unprecedented decline in the earlier months of the year. Much of the growth has been attributed to 5 big tech stocks, which we covered on a recent episode. As we’ve seen these 5 big tech stocks diverge, it’s made many investors ask if valuations even matter anymore?

While these companies are enjoying their highest valuations ever, we see examples like Apple where their stock price has roughly tripled since early 2019, but so too has its Price to Earnings (PE) ratio. In this week’s episode, Erik and Brandon discuss this recent rise and more, including:

What’s behind the recent all-time high of the S&P 500?
What is a Price to Earnings (PE) ratio and why does it matter?
What are the implications of Apple’s stock price and PE ratio rise?
Do valuations even matter anymore?
Can valuations be used as a tool for market timing?
What is recency bias?
The importance of understanding what kind of investor you are and your goals for wealth creation

For more information on this topic, here’s a great podcast episode that Brandon referenced from The Prof G Show with Scott Galloway.

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