The S&P 500 P/E Ratio: A Century of Valuation History

The price-to-earnings (P/E) ratio compares the S&P 500 index level to the trailing twelve months of reported earnings for its constituent companies. It is one of the most widely watched gauges of stock market valuation: a high P/E means investors are paying a premium for each dollar of current earnings — often reflecting optimism, low interest rates, or temporarily depressed earnings — while a low P/E suggests the opposite.

Over the past century the ratio has moved through distinct regimes. It generally sat in the single digits and low teens from the 1930s through the 1980s, briefly spiking during the early-1920s post-war readjustment and grinding through the deflationary earnings shocks of the Great Depression and the stagflation of the 1970s. The 1990s technology boom then pushed valuations into the 20s and 30s, a level not seen since.

The most extreme reading in the series arrived during the 2008–2009 financial crisis: corporate earnings collapsed faster than share prices, driving the ratio to an all-time high of 123.7× in May 2009 — a distortion of the earnings denominator rather than a signal of exuberant pricing. Since the 2010s the ratio has generally run above its long-run median, averaging 19.76× in the 2010s and 26.44× so far in the 2020s, as low interest rates and a heavier weighting toward high-margin technology companies have supported richer sustained multiples.