Factor P/Es signal risks – and opportunities

Major shifts in the macro backdrop, spurred by growing confidence in the post-pandemic recovery, could suggest the spectacular expansion in stock valuations of the past year may be poised for a reset. P/E mean-reversions can be painful or benign for stocks, but they also create new risks and opportunities.

Examining current factor valuations through a historical lens can provide insights into which factors may be at risk of de-valuation and those that look poised for stronger performance.

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