I would think that a company that grew large enough to be in the S&P 500 would not sacrifice it all for the next quarterly results. Hence, I'd expect a larger P/E for the S&P 500 than for the market as a whole.
Then I'm having trouble understanding what you mean when you say:
> > The stock market's quarterly focus
> This idea constantly resurfaces. It's easily shown to be incorrect. If it was true,
> 1. companies would have low P/E ratios
But it looks like companies do have low P/E ratios—the S&P 500's P/E ratios are considerably lower than Amazon (which is company where the stack market does have a longer term outlook), and (as you say), the market as a whole you'd expect to be lower than that even. So when you say:
> Lots of companies have high P/E ratios, meaning the investors believe in the future of the company rather than next quarter.
What companies do you mean by that? Among big companies (that can afford significant long-term R&D spending, which is what began our thread of this conversation) what do you think counts as a high P/E ratio?
You want to believe that companies are slaves to short term results, that they eat their seed corn to do so, be my guest. I'll continue to invest using a buy and hold for decades strategy, which has served me very well.
