LogFAQs > #914334368

Annihilated posted...

http://www.multpl.com/shiller-pe/

The stock market is currently valued about as high as it was before the great depression, which was only second to the dot com bubble. So yes, a correction is expected and needed, and long overdue.

few notes:

1) the peak you see there was jan 2018, which is clear when viewing as a monthly table. the drop then lasted until march, lowering ratio to 31. the current drop is to nearly identical levels yet the ratio is much lower--because earnings have kept rising.

2) pre-1990 data is not useful in analyzing market valuation ratios, as you may notice looking at the monthly tables, post-1990 valuation short term lows are comparable to pre-1990 valuation long term highs. only the great recession dropped us to historical valuation levels and that lasted a matter of months.

3) forward earnings ratios are usually much more illustrative of trends that trailing earnings ratios. current SP500 fwd earnings ratio is about 15. the trouble with a trailing earnings ratio is that it seems very high when earnings are increasing very fast, and price with it to match a forward ratio!

4) even on a trailing basis, we can see we're on a 10-year series of higher lows and higher highs. i remember well the panic of 2011, of 2014, of 2015-2016 (six month rolling bear market that ended in march 2016).
---

And when the hourglass has run out, eternity asks you about only one thing: whether you have lived in despair or not.