Sunday, February 24, 2019

Stocks are still expensive, though not at all time highs

According to price-to-earnings or “PE” data tracked by Yale University finance professor and Nobel Prize winner Robert Shiller, the S&P 500 is about 75% above its historic average valuation. Ten-year forward average returns fall nearly monotonically as starting Shiller P/E’s increase,” warned hedge fund manager Cliff Asness of AQR in a 2012 research paper, as he studied the S&P 500 going back to the 1920s. Also, he added, “as starting Shiller P/E’s go up, worst cases get worse and best cases get weaker.

Today’s level? Compared to history, we’re in the most expensive 10% of starting valuations, according to Asness’ data. “Average” 10-year returns from here? Based on history it’s about 0.5% a year after inflation, he calculated.





Current Shiller PE Ratio: 30.56 +0.19 (0.62%)
4:00 PM EST, Fri Feb 22
Mean:16.61
Median:15.70
Min:4.78(Dec 1920)
Max:44.19(Dec 1999)

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