Stock markets at highs: Are the prices too expensive or still affordable? - Financial expert check

Stock markets at highs: Are the prices too expensive or still affordable? - Financial expert check

According to a report from www.capital.de,

Major stock indices are currently trading near their highs and many are wondering if this is a sign that stocks are overvalued. However, a closer look at the price-to-earnings (P/E) ratio shows that the rising share prices may well be justified. A high index level does not necessarily mean that stocks are three times as expensive as they were 15 years ago, but rather reflects the companies' expected profits. For example, US companies earn significantly more today in nominal terms than they did 15 years ago, due to inflation and increasing profit margins.

This means that the index level could well be justified by higher profits. The impact of dividends and compound interest on stock prices should also be considered in context. The Dax is currently twice as high as in 2008, and the S&P 500 is around three times as high, but this does not automatically mean that stocks are three times as expensive. The rising stock indices could therefore be justified and continue to offer opportunities for investors. It is therefore important to keep an eye on the development of company profits in order to be able to assess the actual value of the stock markets. Looking at the current information, it is therefore still advisable to invest in stocks as the market is still affordable despite high index levels.