S&P 500 Tech Valuation Premium to the Index

## What this measures

How much more (or less) investors pay for a dollar of earnings from the S&P 500's tech and communication services companies than for the index as a whole: the group's trailing P/E divided by the S&P 500's, minus one, in percent.

## Why it matters

A wide premium means the market expects tech profits to keep growing much faster than everyone else's. Premiums that wide have closed before, in 2000 most painfully, either through profits catching up or prices falling.

## How to read it

Zero means tech is valued like the index; +50 means half again as expensive. Read it beside the defensives' premium (equities.sp500.defensives_relative_pe): the gap between the two is the price of growth against safety.

## What it does not say

It is not a forward P/E: analysts' estimates of next year's earnings are licensed data Palanor does not carry. Earnings are reported GAAP net income, so one-off gains and charges move it. It uses today's S&P 500 members, today's sector of each company and current share counts back in time, so earlier years leave out companies that have since left the index. A day is published only when at least 90% of the companies in each group have both a price and a full year of reported earnings, which is when the history starts.

## Source

Net income from company filings with the SEC (XBRL, public domain). Share prices received through a licensed market data provider. Sectors from the public S&P 500 constituent list (GICS sectors). Ratio computed by Palanor.