Financial and energy stocks are currently the most inexpensive sectors based on valuations with ETFs tracking the sector poised to break out to new multiyear highs.
Financial Select Sector SPDR (NYSEArca: XLF) and Energy Select Sector SPDR (NYSEArca: XLE) are both up more than 10% year to date to outperform the S&P 500. [Financial ETF Eyes Post-Crisis High]
“Lost in the shuffle of this surge higher for the market is the quickly expanding P/E ratio of the S&P 500,” Bespoke Investment Group said in a recent blog post. [Financial ETF Ups Bet on Buffett’s Berkshire Hathaway]
The S&P’s trailing 12-month price-to-earnings ratio is about 15.3. “Valuations can certainly expand during rallies, but it’s just something to be aware of here with all the news focused on the push to all-time highs,” according to the post.
Of the 10 major U.S. stock sectors, energy and financials have the lowest P/E ratios of 12.5 and 13.3, respectively, according to Bespoke. [Energy ETFs Outperforming in 2013]
Financial Select Sector SPDR
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.