Some time ago, I posted here the back-of-the-envelope calculation of the S&P500’s P/E sans Amazon and came to the conclusion it would be 18:
Well, it was wrong.
If you do the calculation correctly, you’ll see that the P/E of the S&P would drop just by 0.34 if you removed Amazon from it:
However, the idea that the seemingly high price of the market is caused by a small subset of outliers is not completely wrong - it’s just that the outliers are not individual cherry-picked companies, but whole sectors.
Removing the energy and the internet services sectors leaves the S&P 500 with a P/E of 19.7 - that is not quite under-valued but certainly not indicative of a need for a large correction. At least not a general one.