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US Equity Valuations: Difference between revisions
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=== Shiller P/Es or “CAPEs" === | === Shiller P/Es or “CAPEs" === | ||
Shiller P/Es or “CAPEs" (for Cyclically Adjusted Price/Earnings multiples): compare stocks to average earnings in real terms over the previous 10 years | |||
Tobin’s Q ratio: compares stocks to the total replacement value of their underlying assets. | |||
* Even if tech stocks, obviously generating excitement at present, are excluded, these measures suggest that stocks are historically expensive, at valuations comparable to the eve of the Great Crash in 1929 and of the GFC in 2007: | |||
* The all-time record for the Shiller P/E in 2000 was followed by a terrible decade; the 50-year low it touched in the early 1980s was the signal for a fantastic bull market | |||
* A high Shiller P/E functions like a low implicit equity risk premium; it only makes sense if you think inflation will be tame, and hence bond yields can come down. | |||
[[File:Spe.png|center|thumb|995x995px|https://www.bloomberg.com/opinion/articles/2023-09-11/equity-risk-premium-s-guide-to-the-galaxy]] | [[File:Spe.png|center|thumb|995x995px|https://www.bloomberg.com/opinion/articles/2023-09-11/equity-risk-premium-s-guide-to-the-galaxy]] | ||
[[File:Fff.png|center|thumb|1013x1013px|https://www.multpl.com/shiller-pe]] | |||
== References == | == References == | ||