"Last week, the S&P 500 Index ascended to a Shiller P/E in excess of 24 (this "cyclically-adjusted P/E" or CAPE represents the ratio of the S&P 500 to 10-year average earnings, adjusted for inflation). Prior to the mid-1990's market bubble, a multiple in excess of 24 for the CAPE was briefly seen only once, between August and early-October 1929. Of course, we observe richer multiples at the heights of the late-1990's bubble, when investors got ahead of themselves in response to the introduction of transformative technologies such as the internet. After a market slide of more than 50%, investors again pushed the Shiller multiple beyond 24 during the housing bubble and cash-out financing free-for-all that ended in the recent mortgage collapse." [read full report with charts]
Monday, February 14, 2011
Hussman: S&P Is Richly Valued With Shiller PE Ratio Above 24
John Hussman gave an update on the S&P cyclically adjusted P/E ratio in his weekly market comment. Will the CAPE revert back to the 5-25 range?