S&P 500 Cyclically-Adjusted P/E Ratio (CAPE) vs. S&P 500 Return on Equity (ROE)
Record profitability is helping justify elevated S&P 500 valuations, with trailing four-quarter ROE at 22%, a historic high. But if margins come under pressure and ROE slips, that support could quickly weaken.
Image: Goldman Sachs Global Investment Research
