A number of sectors appear to have run ahead of their long-term average valuations without earnings growth to back them up. The capital goods sector, which has traded at an average valuation of 22x in the last ten years, now commands a premium of 33x; cement, with an average of 15x, now trades at 23x; and the consumer goods sector (average 25x) trades at 35x.
Then there are sectors trading at or below their long-term averages but their current valuations appear to reflect the cyclicity or weakness in commodity prices. Hence, metals, real estate, retail and telecom trade at their long-term average, while oil and gas and utilities trade below.
Market favourites pharma and technology both trade above their long-term averages of 22x and 17x, respectively.
The charts below show how various sectors trade in relation to their long-term average valuations.