Has the deck been cleared for renewed ascent? The percentage of R2000 stocks with a P/E 30x or higher hit 23.2% in June, its highest level since Dec ’21 following which the R2000 sank -20.4% in the forward year. Since June, the R2000 is down -3.8% through yesterday but that doesn’t mean we’re in for a ’22 style rout. While our Small-Cap Market Outlook published Tuesday argues for a pullback to 2745 (-6.0% lower from yesterday’s close), the setup is far different today than ’22. NTM P/E contractions occur when prices fall and/or estimates rise. In ’22, both prices and estimates were falling as inflation soared and the Fed was hiking. Today, despite some concern about higher oil prices, a possible Fed hike and higher yields, estimates are generally rising as prices are falling. This has returned the percentage of R2000 stocks with high P/Es sharply back below its median from which forward year returns tend to much stronger.