The Impact of the 20 Times Multiple on Stock Prices

If valuations come down at all, any degradation in investor sentiment or in the multiple with evaluation that investors are willing to pay can have a pretty steep and direct impact on stock prices. If the multiple just goes down to 19 times, which is still extremely high when you figure that there's not much of a risk premium. At 20 times earnings in the S&P 500, that pretty much comes out to a 5% earnings yield. You can get around 5% just sitting comfortably in a money market fund with no downside risk.