US shares ‘dan­ger­ously dear’

The Daily Telegraph - Your Money - - YOUR MONEY -

Amer­ica’s Dow Jones in­dex broke through 20,000 for the first time in his­tory on Wed­nes­day, help­ing to take Amer­i­can mar­kets to their most ex­pen­sive level in 15 years. The in­dex, which con­sists of just 30 of the best-known Amer­i­can com­pa­nies, has been buoyed by the ex­pec­ta­tion that Don­ald Trump’s new ad­min­is­tra­tion will lower cor­po­rate taxes and in­crease spend­ing – and so boost the econ­omy.

Based on the cycli­cally ad­justed price to earn­ings ra­tio, or “Cape”, the in­dex is now the most ex­pen­sive it has been since 2002.

“Cape” com­pares com­pa­nies’ av­er­age an­nual earn­ings over 10 years (ad­justed for in­fla­tion) with their share price, and can be cal­cu­lated for an en­tire in­dex.

Amer­i­can mar­kets are now at a Cape value of 28.5. By com­par­i­son, the FTSE 100 is cur­rently at 15.5.

Laith Kha­laf, a se­nior an­a­lyst at the in­vest­ment shop Har­g­reaves Lans­down, said that de­spite the record highs for mar­kets, val­u­a­tions were not at the ex­tremes ex­pe­ri­enced dur­ing the tech

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