Is the Stock Market Overvalued? – Update July 2019, and 10-Year Real Forward Return Estimate (iMarketSignals, 5 min read)
A useful study of how to use Shiller Cyclically Adjusted Price to Earnings Ratio (CAPE) for trading equities. The current value suggests a 20% overvaluation. But a more reliable signal can be garnered from comparing the current value to its 35-year average. The ratio of the two is currently 1.2, which historically has been associated with returns of 6% over subsequent years. For reference, at the height of the .com bubble in late 1999/early 2000 the ratio reached 2.5.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)
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