June Swoon Ahead? Maybe, But Not Because of Valuations

It is true that other metrics paint a more negative picture. The Shiller P/E ratio, a cyclically adjusted price-to-earnings (CAPE) ratio, suggests U.S. stock valuations are unambiguously expensive. However, today’s levels are not yet in the nosebleed territory that characterized the 2000 Internet bubble stocks and aren’t yet at a level that suggests negative returns over the long term.
Most importantly, valuations look more reasonable when you take a global perspective. The United States appears the most expensive of the major markets. CAPE valuations are much closer to average for other equity markets. While none of the other markets, with the possible exception of Japan, are at a particularly cheap level, valuations look like much less of an impediment than they are in the United States

But while I don’t foresee a market correction in the near term, there are a number of areas of the equity market that look overvalued and toward which investors will want to exercise caution, including growth stocks – particularly in the biotech and social media sectors – and U.S. small caps.



.http://www.blackrockblog.com/2014/05/30/june-swoon-valuations/?c=e24&cmp=russk_em&chn=EMC&cid=emc:russk_em:e24:e24