Embracing Risk, or Expensive Stocks?

Two articles in today’s WSJ seem to be battling each other:

By Most Measures, Stocks No Longer Look Cheap:

While the rebound was a relief for battered stock investors, it complicated matters for those still trying to decide whether to get in or add new holdings. Higher prices have made stocks less of a screaming buy by several valuation measures.

For example, based on the last 12 months of operating earnings, the S&P 500 was changing hands late last week at a price-to-earnings ratio of 14.7, according to Morgan Stanley. That is still below the average trailing P/E of 17 for the last 25 years but up sharply from 10.5 in February.

Looking ahead to expected earnings for the next year, the story is less compelling for buying stocks. The S&P 500 was at a forward P/E of 14.5 late last week compared with a 25-year average of 15, according to the Morgan Stanley data. But many investors are reluctant to put too much weight on the forward P/E ratio during a period of significant uncertainty about the earnings outlook.

Versus this article:

World Regains Taste for Risk:

Investors are aggressively piling back into markets shunned as too risky just a few weeks ago — driving up stocks in the developing world and raising concerns that the euphoria may be overdone.

As fears of a deepening global recession are pushed aside by expectations of recovery, investors have rediscovered their appetite for risk in places ranging from Brazil and China to Russia. Brazil’s Bovespa stock index is up 75% since its October lows, and across the emerging-market world, stocks are up 50% since the beginning of March, according to the MSCI Emerging Markets index, which tracks 23 markets.

Interesting contrast . . . Meanwhile, Dow off 135, S&P down 1.5%, Nasdaw barely negative, down a point.

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