Back to Basics - Nielsen Analyst Blog

Check out Charlie Buchwalter's blog posting on market corrections and the implications for the market research world:

Back to Basics

The recent cataclysmic events in financial markets have jolted many of us into a “back to basics” mentality. Basics such as “what goes up must come down.” Basics such as “live within your means.”

Over the weekend, my colleague Dave Martin and I reviewed a 100 year trend of price/earnings ratios for the S&P 500. For the last 18 years or so, the average has driven far north of the long term average of 15, and a “back to basics” mentality would have indicated that sooner or later it would come back down to the average, and probably overshoot it on the way down. Lo and behold: an article in last Thursday’s Wall Street Journal reported that the P/E ratio went below 11...