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Chart of the Week
Expensive Today, Expensive Tomorrow
Despite recent valuation compression, long-term metrics such as the cyclically-adjusted P/E ratio remain elevated for the S&P 500. The potential backdrop of rising rates and decelerating growth may drive further repricing of multiples, though we expect relatively stable earnings to hold valuations higher over the medium-term. We believe companies that prioritize profitability over revenue growth will become more favorable in this higher rate and inflation environment.
Source: Robert Shiller, Bloomberg, and Goldman Sachs Asset Management.