We have seen the US market pulling back heavily, especially the NASDAQ since the turn of the year. On February 23, the closing price for the S&P 500 was 4225.50 and the forward 12-month EPS estimate for the index was $228.85. Based on this closing price and EPS estimate, the forward 12-month PE ratio for the S&P 500 on that date was 18.5. 

This is the first time that the forward 12-month PE ratio was below the 5-year average of 18.6 since the 15th of April 2020 (the start of the Covid Crisis).

From the above, we see that the valuation of the S&P has in fact retraced back to 2020 level in terms of forward PE, right at the beginning of the Covid crisis.

Economic condition pre-covid was different compared to what we are seeing in the economy today. Of course we had the US central bank injecting record liquidity to prevent a recession from happening as a result of the pandemic. Earnings grew for most of the US companies during the pandemic crisis as well with more than 70% of the S&P companies beating estimates in 2021. Big tech companies are sitting on ample cash.

Some risks that I am seeing now is of course, the expectation of a slowdown in the US economy, a hawkish FED, inflation, and geopolitical risk (ongoing war in Ukraine).

This might be a good opportunity for longer term investors to position into the markets.