S&P 500 Forward P/E Premium Hits 22%, Lowest Since 2020
The S&P 500's forward P/E premium over global equities has dropped to ~22%, the lowest since 2020, driven by robust US earnings growth far outpacing Europe.
The valuation premium of US stocks relative to the rest of the world has narrowed sharply. At ~22%, the S&P 500's forward price-to-earnings premium over global equities sits at its lowest since 2020, down from around 50% in the second quarter of 2024.
This compression brings the premium in line with levels seen in 2018–2019 and below the 10-year average of 31%. The decline comes even as the index trades at all-time highs.
Underpinning the re-rating is exceptional earnings strength. S&P 500 profits are currently tracking +28.7% year-over-year growth, roughly double the +14.4% pace reported for European companies.
As a result, many US stocks are becoming cheaper on a forward earnings basis even as prices rise, creating a dynamic where improving fundamentals absorb multiple expansion.
Source: The Kobeissi Letter