The year isn't even half over, and the S&P 500 has already advanced almost 18% year-to-date. Plus, the value of the S&P 500 has jumped more than 5% during the first two months of the second quarter.
Globally, U.S. stocks are outperforming most developed and emerging-market countries.
Have stock values become overstretched?
"The forward 12-month P/E ratio for the S&P 500 now stands at 14.4, based on [May 16's] closing price (1650.47) and forward 12-month EPS estimate ($114.94)," Factset wrote earlier this month. "This is the highest forward 12-month P/E ratio logged by the S&P 500 in more than three years (April 2010). Given the high values driving the P in the P/E ratio, how does this 14.4 P/E ratio compare to historical averages? Is the index now overvalued?"
On the one hand, the index is now trading above both the 5-year (12.9) and 10-year average P/E ratios, the research firm points out. On the other hand, it is still trading below the 15-year average P/E ratio (16.5), and is not close to the peak P/E ratio of 25 recorded in the late 1990's and early 2000's.
The PE10 (also known as the Shiller P/E ratio) is another measure of valuations.
Currently, the S&P 500's PE10 is at 24.8, which puts it above its historical median of 15.89. While that may seem elevated, it's still below its 1999 peak of 44.20.