The S&P 500 Is Near an All-Time High but Trading at Its Lowest Valuation in a Year. Nvidia, Alphabet, and Amazon Help Explain Why.

Despite multiple major sell-offs, the S&P 500 (SNPINDEX: ^GSPC) has more than doubled since the start of 2023 and is up 13.1% year-to-date. That’s significant outperformance relative to the index’s annual total returns of 9% to 10% over long periods.

Investors sometimes associate higher stock prices with stocks being more expensive. Nvidia (NASDAQ: NVDA), Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), and Amazon (NASDAQ: AMZN) show why that isn’t always the case, and why the S&P 500 remains a good value.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »

The S&P 500 forward P/E ratio is just 19.4

Valuations expand when stock prices outpace earnings growth. Valuations compress if earnings hold up during steep sell-offs or if earnings are simply growing faster than stock prices — which can happen during periods of rapid innovation like the one we are in now.

You may be surprised to learn that, despite the major indexes being around all-time highs, many of the largest growth stocks have actually gotten cheaper based on their forward price-to-earnings (P/E) ratios.

As you can see in the chart, Nvidia trades at just 24.4…