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Schiller PE is now at 35.13. which is the 3rd highest in the history of the S&P 500.
According to John Bogle's formula of calculating long term prices, a reversion to the mean of Schiller PE 17.10 would be a -50% drop, which of course would be partly countered by earnings growth and inflation. So if we assume a 5% annual earnings growth (including inflation) then stocks might be going almost nowhere in the next decade.
I know one metric does not tell the whole story and I am not suggesting we should all run to get out of the market, but isn't anyone else worried? I am reducing my equity allocation a little as I can't see what justifies such euphoria? The risk/reward is not there, especially with treasuries over the 4% mark. What am I missing?
https://www.multpl.com/shiller-pe
submitted by /u/ExtentFuture4133
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According to John Bogle's formula of calculating long term prices, a reversion to the mean of Schiller PE 17.10 would be a -50% drop, which of course would be partly countered by earnings growth and inflation. So if we assume a 5% annual earnings growth (including inflation) then stocks might be going almost nowhere in the next decade.
I know one metric does not tell the whole story and I am not suggesting we should all run to get out of the market, but isn't anyone else worried? I am reducing my equity allocation a little as I can't see what justifies such euphoria? The risk/reward is not there, especially with treasuries over the 4% mark. What am I missing?
https://www.multpl.com/shiller-pe
submitted by /u/ExtentFuture4133
[link] [comments]
Continue reading...
