At least according to a lot of market strategists, including this one Stock market bears are making a big mistake
Shiller’s data, going back to 1880, show that the historic average CAPE for the U.S. stock market has been about 16. When the market has been significantly above that, subsequent returns have typically proven to be poor — and vice versa. Today it is at 25.
I have argued this before, but here is what most people don’t understand about today’s earnings. They are abnormal…a figment of one’s imagination. Same as they were in 2007 when the S&P earnings went from a seeming normal P/E of 18 at 2007 top to 128 during the collapse in 2008.
Back then earnings simply vanished into thin air, just as they will today. Why? Because most of the corporate earnings everyone relies on today are based on a massive amount of credit within our financial system. That massive QE and low interest rate stimulus that the FED unleashed on the US economy. When it goes away (just as it did in 2007-2009) you will see corporate earnings collapse….making today’s valuation not only expensive, but insanely expensive. One thing is for sure….it’s never different.
Bears Are Dead Wrong & Stupid. It’s Different This Time. Google