Writing my first Forward of 2024 less than two weeks since the start of spring, I find myself focusing on new beginnings, or better yet, starting points. In short, starting points matter—in life, in business, and in markets. In that vein, I’d like to reflect on a few starting points as we embark on a new season and a new quarter. 

U.S. equities are starting from a high point 

Firstly, U.S. equity investors are starting from what can only be described as elevated levels. The S&P 500 Index currently trades at a forward price-to-earnings (P/E) ratio of 21. That is well above the historical average of roughly 16 and a good distance away from the rest of the world at just under 14. While it is true that equity performance has broadened thus far in 2024—Japanese equities are enjoying a strong rally and the “Magnificent Seven” are ending their run in favor of the “Fab Four” or maybe the “Terrific Trio”— quite a bit of good news is already priced into the U.S. market. Starting from here, the bar has been set fairly high for earnings to outperform expectations and drive prices higher. We acknowledge that P/E multiples can still expand from these heights, especially if they’re helped along by a pivot to easier monetary policy via interest rates cuts from the Federal Reserve (Fed).

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