It is less than two months since the start of the US and Israel’s war in Iran but the S&P 500 has already returned to record highs. Have stock market investors moved on from fears of escalating conflict? Perhaps not.
At its lowest point in late March, the US benchmark index fell less than 10 per cent from its all-time high — not even meeting the popular definition of a correction, much less a full bear market. The announcement of a two-week ceasefire sparked a huge rally and, even after a slip at the start of this week, the index was still above its prewar peak.
Look at valuations rather than prices, though, and a different pattern emerges. Valued as a multiple of the next 12 months’ earnings, the index is 5 per cent cheaper than it was at the start of the war, according to LSEG.