P/E ratios and interest rates

Q – Here’s a point that’s had me puzzled for some time now. One analyst suggested that during periods of low interest rates, it’s quite acceptable for companies to have high P/E ratios. I am trying to see the logic/math that would support such a statement. Any ideas? – A.M.

A – A high P/E ratio means stocks are relatively expensive. Perhaps the analyst’s argument is that when interest rates are very low, money market instruments and bonds are less attractive, therefore making it more acceptable to pay a premium for quality stocks. – G.P.