Bull Markets & P/E Multiple Expansion

To Be, or Not to Be: Bullish

click for ginormous graphic

Source: MARKet Perspectives May 2018, Mark A. Lehmann, Global Strategist Portfolio Management



My friend Mark Lehmann has been a strategist at UBS for decades; his research (rarely available to the public) is always fascinating and thought-provoking.

The chart above is a perfect example: he dissects well known data but presents it in a way that is both fresh and interesting.

My confirmation bias is at play here: I define the primary characteristic of bull markets as psychological, i.e., P/E multiple expansion. (See e.g., this, this, this, this, or this).  This chart clearly shows that same underlying element of the bull market.

The next time you hear someone lamenting that its multiple expansion and not earnings driving stocks hire, remind them of this simple fact: 75% of bull markets are nothing but multiple expansion…


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