Highlights

  • D. David Jilek, Chief Investment Strategist at Gateway Investment Advisers, notes that as of the end of the third quarter, equity market valuation was at a significant discount relative to the levels present for most of the 2000s.
  • The P/E ratio of the S&P 500® Index was around 23 at the beginning of 2022, based on 12-month earnings – and ended Q3 around 17.
  • But as most savvy shoppers know, discounted prices don’t always represent a compelling reason to buy.
  • While history has shown that equity market returns from lower valuation levels can be attractive, investors must remain vigilant against downside risks.
  • In this environment, strategies that use index options to reduce risk and generate attractive cash flow could be a great addition to portfolios.