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iShares Core MSCI EAFE IMI Index ETF (XEF)
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iShares S&P/TSX 60 Index ETF (XIU)
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iShares Core S&P 500 ETF (IVV)
Q: I have cash to invest, mostly into ETFs and as a value investor the P/E of the S&P 500 is a stumbling block for me: 23% for IVV vs about 15% for XIU - so about 50% more. XEF has a P/E of 14.31%. The rule of 20 says P/E + inflation should be 20 or less. A hard question, but do I overlook the P/E of the S&P 500 and invest now with a long term hold or do I wait?
Thanks for your comments!
Thanks for your comments!
5i Research Answer:
A tough call, as the S&P 500 performance is being driven by seven large stocks, primarily. One could balance these out with an equal weight fund such as RSP, but then seven solid companies would have less exposure (catch-22 we know). Corporate earnings growth has resumed again, after three declining quarters. Lower interest rates will help. At 21X earnings, considering the growth and inflation outlook in the US, we would still be comfortable buying. Timing is rarely perfect, but $6 trillion moved onto the sidelines when rates rose, and if rates do pivot some of that money will come back into equities. The period of time following the last rate hike has been historically quite good for the equity markets.