Shiller Says Market Valuations Warrant Caution

Nobel Laureate Robert Shiller writes in a recent New York Times article that “today’s CAPE is sending a troubling message,” noting that the market valuation ratio he developed (which now stands at nearly 30) was higher only in 1929 and around 2000 (when it hit 33 and 44, respectively). In both instances, Shiller writes, “market declines followed those very high readings.” He qualifies his comments, however, by clarifying that the CAPE “suggests a dim outlook for the American stock market over the next 10 years or so, but it does not tell us for sure nor does it say when […]

Buffett Puts Market’s Valuation in Context with Earnings Yield vs. 10 Year

In a CNBC interview that aired last month, Warren Buffett shared his thoughts on current market valuations and how he would respond to investors that feel they missed their opportunity to buy into the market. “Well, I would say they don’t know, and I don’t know. And if there’s a game it’s very good to be in for the rest of your life, the idea to stay out of it because you think you know when to enter it– is a terrible mistake.” Buffett believes the U.S. stock market is a good game to be in. In fact, the dominant […]

The Market Valuation Snapshot

In our Hotlist newsletter from last month we took a look at the market’s stretched valuations based on several indicators, and offered insight regarding how actions by the current administration may or may not substantiate them. The market P/E from the beginning of the year, based on trailing 12-month earnings (as of January 9th ,) was 25. We tracked other metrics as follows: Shiller P/E: 28.2, up from 25.7 as of the last update in May. This measure, which uses inflation-adjusted 10-year historical earnings to account for short-term fluctuations in profit margins during business cycles, tracked well above the historical […]

European Fund Manager Says Bonds May Rebound

The largest money manager in Europe believes that investors who have driven U.S. stock markets to record highs in anticipation of fiscal stimulus from the Trump administration “may be in for a surprise,” says a recent Bloomberg article. Didier Borowski, head of macroeconomics for Paris-based Amundi SA, argues that even if Trump delivers on his fiscal stimulus promises, results won’t surface before next year. “Following the vote for Trump,” he says, “markets have reacted as if there were only upside risks. U.S. equity markets could go further into bubble territory as risks are becoming increasingly asymmetric. That would be an […]

Market’s Valuation Could Hold Back Trump Bull

During the Trump years, it will be tougher for stocks to see the kind of gains that occurred during the Obama administration,” according to last week’s Wall Street Journal. This is not only because the market had bottomed when Obama took office (and stocks were cheap), but also because of “what happened to corporate profits versus the overall economy.” At the end of last year, that article states, the total value of U.S. stocks was an estimated 169% of gross domestic product (GDP), compared to 85% at the end of 2008, and is “now approaching the 177% valuation the market […]