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The S&P 500 is bumping up against its 2007 highs but a look at valuations suggests that equity market conditions are significantly different now than five years ago.

The chart above shows the current price-to-earnings and price-book ratios compared with the levels when the S&P 500 peaked on Oct. 9, 2007. In almost all cases, valuation levels now are markedly cheaper than in 2007 but a surprising number of sectors are very close to peak levels.

For the benchmark as a whole, at 15.1 times trailing earnings, PEs are 16 per cent lower than before. The health care, industrials and technology sectors are far more attractive currently, trading 20, 27 and 73 per cent cheaper respectively. On the other hand, telecommunications stocks are now more expensive than in 2007 and financials, energy, utilities and materials are within spitting distance of the previous highs.

The comparison of price-book value is more positive for investors. Technology stocks are again the standouts, 52 per cent less expensive, and financials are fully 67 per cent more attractive in price-to-book terms. Telecom is again the negative outlier.

There is no cause for concern in these numbers but investors would have hoped for more sectors trading at significant discounts to previous highs. We can hope that stocks get more attractive in the coming months without falling prices, a trend that can be established with rising earnings. Failing that, the view that the U.S. market is beginning a new secular bull market will be harder to support.

Scott Barlow is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Scott on Twitter at @SBarlow_ROB.

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