Multiple expansion
MarketsDefinition
Rising P/E (or other valuation multiple) without proportionally rising earnings. Stock prices up even when fundamentals stay flat. Caused by falling rates, improving sentiment, or upgraded growth assumptions.
2009-2021 was the longest sustained multiple expansion era in modern history. P/E ratios roughly doubled from 12 to 22+ as rates fell from ~5% to ~1%. The reverse process (multiple compression) when rates normalized in 2022 was therefore predictable in direction.
2009-2021 was the longest sustained multiple expansion era in modern history. P/E ratios roughly doubled from 12 to 22+ as rates fell from ~5% to ~1%. The reverse process (multiple compression) when rates normalized in 2022 was therefore predictable in direction.