Charts show just how extreme valuations have become
The CAPE ratio, or cyclically adjusted price-to-earnings ratio, compares the price of a stock (or index) to average earnings over the previous decade, while taking care to adjust for inflation.
It was developed by Robert Shiller, an American economist and a Nobel Prize laureate in economics.
Price-to-earnings
This was, perhaps, the most widely used of the metrics included here. The forward price-to-earnings ratio for the S&P 500 crossed above 22 in November for the first time since 2021
Strategists who spoke with MarketWatch also offered a word of caution: just because stocks look expensive, doesn’t mean they can’t get more expensive.
It’s worth considering that the higher valuations of today might actually be justified.
Some analysts think comparing today’s stock market to the market of yesteryear simply doesn’t make much sense.
That’s because, since the 1990s, the technology boom unleashed by the internet has changed many aspects of the U.S. economy.
Joseph Adinolfi MarketWatch 16 November 2024
Kommentarer