Ed Yardeni, the founder of his namesake research firm, says that while a drop in the PEG ratio may offer some comfort for equity bulls, it’s worth noting that the decline is accompanying higher P/E multiples as well as earnings expectations. Just as higher valuations can be seen as growing investor optimism, rising profit forecasts shows analysts are turning more bullish.
“CAPE tends to be too pessimistic and PEG may be too optimistic,” Yardeni said by phone. “The truth may lie somewhere in between.”
This article was provided by Bloomberg News.