Do I need to be concerned about the S&P500 CAPE ratio?

[Phooey]

Probably going a bit deep here for an amateur investor.. but the CAPE ratio for the 500 is looking a bit peaky compared to the Mean. Is there a perfectly good explanation for this other than history says we're in for a bumming?


https://www.multpl.com/shiller-pe

[Benbay001]

Phooey said:

Is there a perfectly good explanation for this

The risk free base rate is at an all time low, which in turn drives up the price people are prepared to pay for a return in other assets.

Thats the explanation, at least.

I dont buy it, looks like a bubble to me.

[guyvert1]

Phooey said:

.. history says we're in for a bumming?..

No idea, but thanks for making me giggle with your expertise in financial explanations

[dingg]

10 year trend looks ok

https://www.longtermtrends.net/sp500-price-earning...

Don't worry be happy

Eta nukes might change things :-0

Edited by dingg on Tuesday 5th April 10:27

[gotoPzero]

I used to look at that site quite often, at least once a month.

I also used to think - omg this is going to burst soon....

Then I realised something. Looking at graphs with time lines that are 100+ years long mean nothing to your average investor.

Its just noise.

imvho

[Benbay001]

Benbay001 said:

I dont buy it, looks like a bubble to me.

I should probably qualify that with "Im still fully invested".

Im just well aware we could be in for an astronomical crash if the CAPE ratio mean reverts.

[Phooey]

guyvert1 said:

No idea, but thanks for making me giggle with your expertise in financial explanations

I just hate being first in the queue

[Derek Chevalier]

Phooey said:

Probably going a bit deep here for an amateur investor.. but the CAPE ratio for the 500 is looking a bit peaky compared to the Mean. Is there a perfectly good explanation for this other than history says we're in for a bumming?


https://www.multpl.com/shiller-pe

It's unlikely that many people are going to have all of their money in the S&P 500, so even if it is overvalued, and falls, it's likely that other asset classes, geographic areas etc will cushion the fall somewhat.

[dingg]

If the spoos takes a tumble, everything equity wise will follow. America farts the rest of the world follows through...

[Derek Chevalier]

dingg said:

If the spoos takes a tumble, everything equity wise will follow. America farts the rest of the world follows through...

Have a look at the S&P 500 from 2000-2010 vs emerging markets for an example of why this isn't always the case.

Global markets may be correlated in the short term, but that doesn't mean they necessarily track each other over longer time frames.