Journal Article

A retrospective on the stock market in 2000

Abstract: During late 1998 and much of 1999, the price earnings ratio (P/E) of the S&P 500 index reached unprecedented levels. This was especially evident for the largest 18 technology firms, whose market-weighted P/E exceeded 125 in March of last year. These valuations, which dominated the NASDAQ, proved unsustainable. This Commentary reviews factors that affect P/E ratios and concludes that investors' expectations for earnings growth were overly optimistic, especially for large-cap technology stocks, and that investors could have known this before the bubble burst.

Keywords: Stock market; economic conditions - United States;

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Commentary

Publication Date: 2001

Issue: Jan

Order Number: 2