The post February market correction rally may be one negative event away from going up in smoke.

All it's going to take is investors giving a hoot about stock valuations again. The S&P 500 price-to-earnings multiple on a trailing four quarters basis has surged to a historically elevated level of about 20 times. While that is down from 23 times at the S&P 500's peak on Jan. 26, 2018, the level is "sufficiently high" to check the box for "elevated" valuation conditions, says LPL Financial. 

"[This level of] valuation] suggests an above-average bear market decline when the [negative market] catalyst arrives," LPL Financial thinks. The valuation picture gets even more worrisome when stepping out of the S&P 500 and drilling into the red-hot Nasdaq Composite

Forward Price-to-Earnings Multiples

  • Facebook (FB) 33 times
  • Amazon (AMZN) 258 times
  • Netflix (NFLX) 252 times
  • Google (GOOGL) 63 times
  • Nvidia (NVDA) 51 times
  • Intel (INTC) 26 times
  • Salesforce (CRM) 745 times
  • Adobe (ADBE) 65 times

No wonder why Warren Buffett can't find anything to spend $116 billion on.

Amazon, Alphabet and Nvidia are holdings in Jim Cramer's Action Alerts Plus

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