Savvy Trades and Investments

[researcher59]

Wade: that's a blog post that mentions a single year 2014, not an average over many years, nor is the source sited - Yardeni has a lot more credibility. The Russell 2000 PE has been creeping higher over the years due to more money losers in it. It's becoming a high PE index for that reason.

Yardeni shows the forward PE for the Russell currently at 27.7 .... that's on operating earnings, a better measure than GAAP earnings for which it's 32 as the WSJ shows.

Looking at Yardeni's chart we can estimate the Russell 2000 forward PE has averaged roughly 23 from 2014 to present and maybe around 22 before that .... so at 27.7 it's 20% above the last 7 year average, NOT 100% as you imply. But it's 20% higher for good reason.

The pandemic continues to depress forward estimates and the Russell 2000 PE is creeping higher due to money losers, like biotechs, spac mergers, startups, etc. The Russell is a lower quality index than the S&P600 small cap index which has stricter entry requirements.

Here's the link - the chart of the Russell historic PE is at the bottom in figure 24 -

https://www.yardeni.com/pub/stockmktperatio.pdf