Every quarter, J.P. Morgan publish a guide to the markets – a deck filled with charts and data that offer plenty of inside on where the market is and where it may go. After an incredible 18 months of stock market growth, a number of indicators suggest that the market could be quite expensive. However, when compared to some of the previous market tops – like 2000-01 – it doesn’t seem to be quite as lofty.
One interesting insight is just how concentrated the top end of the US stock market is (here we’re talking about the big tech companies – Apple, Amazon, Alphabet and Microsoft). The biggest 10 stocks make up almost 30% of the S&P 500 index, the highest concentration in history. And the P/E ratio of the top 10 compared to the remaining companies in the S&P 500 is at a gap not seen since 2000.
In the consumer finance section, there are also a few interesting charts on the strength of the US consumer’s balance sheet. America’s household debt service ratio (debt payments as a percentage of disposable personal income) is at 8.5%, which is the lowest it’s been since the chart begins in 1980. At the same time, US household net worth is at the highest level it’s ever been, double where it was in 2007 right before the GFC. These two numbers are pleasing, but they are averages. And the averages may be obscured by the growing income inequality in the US, with the top 10% now earning 50.5% of all pre-tax income, the highest level since the chart begins in 1950.
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