The S&P 500 PE ratio is an important determinant of the value of stock market and the trend of the S&P 500 (^GSPC: 1052.63 0.00 0.00%). Historically, the S&P 500 PE ratio has a median of 15.7. Today, the S&P PE ratio is 139 based on a closing price of 1,044 on Friday, September 11, 2009. This assumes the trailing earnings for the S&P 500 companies as reported by Standard & Poor’s for the four quarters ending June 30, 2009. A PE ratio at 139 is not sustainable. What is a reasonable PE ratio for the S&P 500 given our current situation?
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