The Market Looks Expensive. Abby Joseph Cohen Thinks You Should Care.

Markets are expensive. That is not a contrarian take. That is arithmetic.

Price-to-earnings ratios across major indices are sitting well above historical averages. When you pay more for the same dollar of earnings, your forward returns compress. The math does not care about sentiment.

Who Is Saying This Matters

Abby Joseph Cohen is not a permabear looking for clicks. She spent decades as a partner at Goldman Sachs. She called the 1990s bull market when others were skeptical. She is now a professor at Columbia Business School. Her track record earns her a hearing.

Her current read: lofty stock prices are hiding risks that investors are not paying enough attention to. Specifically, the labor market.

The Labor Market Is a Lagging Signal With Leading Consequences

Labor market weakness does not show up in stock prices immediately. It shows up in consumer spending first. Then in earnings revisions. Then in price action. By the time it hits the tape, the repricing has already started.

Initial jobless claims creeping higher. JOLTS openings declining. Hiring freezes spreading across sectors. These are not soft signals. They are leading indicators for corporate revenue and margin pressure.

Valuations Leave No Margin for Error

High multiples price in an optimistic earnings trajectory. That is the bet embedded in current prices. Any downside surprise, whether from labor, consumer spending, or credit, compresses those multiples fast.

Late-cycle earnings tend to hold up longer than expected. Then they do not. The transition from "things are fine" to "things are not fine" is rapid. Valuations at elevated levels amplify that speed.

Cohen's warning is not that a crash is coming. It is that the risk-reward is asymmetric. You are paying full price for a company on a good day. A bad day reprices everything.

What This Means for Traders

• **Elevated P/E ratios leave no cushion.** Any earnings miss or guidance cut hits harder when you are already paying a premium multiple. Position sizing matters more in stretched markets.
• **Watch labor data before it moves markets.** Weekly jobless claims and monthly JOLTS data are early reads on consumer health and corporate hiring intent. They move before the headlines do.
• **ChartOdds earnings history shows how fast multiples compress during labor downturns.** The historical pattern is consistent. When the data turns, the repricing is not gradual.