Even if you prefer price-to-earnings ratios, Birinyi Associates peg the large-cap barometer (S&P 500) at 18.6. The small-cap barometer (Russell 2000) is sitting on a trailing price-to-earnings ratio of 48.9. Only by accepting forward 12-month estimates for the Russell 2000 do you get to a more tolerable 18.8.
For those who are less inclined to take valuations as seriously in this Fed-fueled rally, there are relative strength indications to consider. The iShares Russell 2000 (NYSEArca: IWM) is the strongest that it has been relative to the S&P 500 SPDR Trust (NYSEArca: SPY) all year.
I am not suggesting that ETF enthusiasts stampede for the exits and sell all of their small-cap stock holdings. By the same token, even a momentum buyer may wish to tread lightly in the small company arena.
Gary Gordon is president of Pacific Park Financial, Inc.