Stock markets around the world have risen steadily, with year-to-date returns as of 5 Aug 2026 in several markets reaching notable levels, which may lead many to feel that stocks are becoming "expensive" and hesitate to invest.
For example, South Korea’s KOSPI has surged over 48.8%, Thailand’s SET Index recovered more than 26.1%, Nasdaq 100 rose 17.1%, and the S&P 500 gained 12.5%, nearing new all-time highs again.
However, higher stock prices do not always mean stocks are expensive, because professional investors focus not just on index levels but on the price paid relative to company earnings.
Especially if listed companies’ profits grow rapidly, stocks that seem expensive today can become "cheaper" in terms of valuation in the future.
This is why the P/E ratio remains one of the key tools investors use to evaluate market attractiveness.
Looking at global stock markets now, many indices have risen sharply, particularly technology sectors like AI and semiconductors leading the market, causing some investors to hesitate about buying now due to concerns that prices might be "overvalued."
However, according to J.P. Morgan Asset Management data as of 31 July 2026, valuations of major global stock markets are not unusually high, indicating that although many indices have risen considerably, the entire stock market is not necessarily overpriced.
This view aligns with recent data from Finnomena, a wealth technology investment advisory platform, which notes that although the S&P 500 trades near historic highs, U.S. stocks are not as expensive as many fear when compared globally.
Currently, the forward P/E premium of the S&P 500 over the global market has narrowed to around 22%, the lowest since 2020, down from about 50% in Q2 2024, and below the 10-year average of about 31%.
This is mainly due not to falling stock prices but to very rapid profit growth among U.S. listed companies. Earnings for S&P 500 companies are expected to grow 28.7% from the previous year, while European companies are forecast to grow only 14.4%, roughly half of the U.S. rate.
Therefore, even if U.S. stock prices hit new highs, faster profit growth means stock valuations may become cheaper in relative terms.
One of the most widely used indicators globally is the P/E Ratio (Price to Earnings Ratio), calculated as stock price divided by earnings per share (EPS).
It shows how many baht investors are willing to pay for one baht of company profit. For example, a stock priced at 200 baht with EPS of 10 baht has a P/E of 20, meaning the market pays 20 baht for each baht of profit.
Generally, there are two types of P/E ratios:
However, many mistakenly equate a high P/E with expensive stocks and a low P/E with cheap stocks.
In reality, if a stock trades at a P/E of 25 today but company profits grow by 30% next year, and the stock price remains unchanged, the P/E will automatically decrease as EPS rises.
Conversely, if company profits decline, the P/E can rise even if the stock price stays the same, making the stock look more expensive without a price increase.
Therefore, determining whether the stock market is "expensive" or "cheap" should not be based solely on index levels but must consider the profit growth trends of listed companies, as the true market value depends on future earnings capacity rather than current stock prices.
Source: Tradingview, JPMAM, Finnomena
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