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StockMarketAgent
Market outlook · Section 4

Valuation dispersion

The bear-side reading first. Forward-multiple dispersion at 92nd percentile of 10-year history — the index is two markets in a trench coat. How widely forward multiples are scattered says whether the index is one market or two: a top-quartile cohort priced for continuation and a bottom-quartile cohort priced for deceleration. The marginal dollar of cap-weighted return depends on the top quartile not re-rating lower.

Universe4 index baskets
AnchorForward P/E
As of2026-05-09
The map

Where the spread is widest

Each basket plotted by its forward-P/E spread, from the 25th percentile (cheap edge) to the 75th (expensive edge), with the dot at the median. The wider the bar, the more the average is concealing.

Index fwd P/E range
17.1× – 21.4×
mid 19.2×
Forward P/E

Quartile spread by basket

S&P 500 (cap-weight)
19.4×
S&P 500 (equal-weight)
17.1×
Russell 2000
16.2×
Nasdaq 100
26.9×
Bar spans the 25th-to-75th percentile forward P/E; the dot marks the median. A wide bar at a high percentile is the diagnostic that the index is two markets in one.
The ledger

Per-basket dispersion

The four baskets ranked by quartile spread against their own ten-year history. The widest spreads at the highest percentiles are where the headline multiple says least about the underlying cohort.

BasketP25MedianP75IQR10y %ileRead
S&P 500 (cap-weight)Top-quartile multiples concentrated in mega-cap technology + utilities; bottom quartile concentrated in financials + energy.
17.0×19.4×24.8×7.8
P92
Very wide
Nasdaq 100AI-leverage cohort dominating; non-AI tech multiple compression already underway.
21.4×26.9×33.5×12.1
P88
Very wide
Russell 2000Profitless cohort still pulls the upper quartile higher than fundamentals justify; profitable small-caps look closer to fair.
11.8×16.2×24.1×12.3
P78
Wide
S&P 500 (equal-weight)Equal-weight valuation closer to historical median; cap-weight elevation is a top-five-names phenomenon.
14.2×17.1×21.4×7.2
P64
Wide
The read

What the dispersion implies

The market’s headline multiple is unremarkable. The story is in the scatter beneath it. When the spread between the cheap and expensive edges sits this high in its decade-long range, the average is doing more concealing than describing — index-level valuation tells you very little, and the opportunity and the risk both live in the spread.

Dispersion in the top decile of history is not a forecast — it is a tell that the price implies a particular bifurcated thesis. If that thesis fails, the resolution is usually a mean-reversion in dispersion, not a uniform de-rating. The honest conclusion is that this is a market to be selective rather than directional in.

Keep reading

The rest of the outlook

Dispersion is one lens. Pair it with the archetype-adjusted P/E research for the per-sector slice, then read it alongside regime, breadth and sector rotation.

Outlook overview →
Market regime

Composite risk-on / risk-off read across trend, credit and volatility.

Breadth

Participation beneath the index — how many names carry the move.

Valuation dispersionYou are here

How widely valuations are scattered — and where the cheap pockets sit.

Sector rotation

Where relative strength is flowing across the eleven GICS sectors.