A retrospective on the stock market in 2000

John Carlson () and Eduard A. Pelz

Economic Commentary, 2001, issue Jan

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 (search for similar items in EconPapers)
Date: 2001
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