What the Shiller PE (Price-to-Earnings) Ratio Tells us About Current Market Valuation

What does Shiller PE (Price-to-Earnings) Ratio Tells us About Current Market Valuation? As all 3 major US markets enter uncharted territory, should you be thrilled and sitting pretty, or concerned and thinking about protecting what you’ve gained? One can’t make money in markets by being a perma-bear and avoiding risk because the market may go down, but neither can you make money by having your head in the sand, only to react emotionally and sell low after a pull-back.

The Shiller P/E is a long-term forecasting tool. It’s not a perfect indicator, nothing is. But it does suggest that future returns are likely to be very low for years to come. This does not mean you go out and sell everything, but when you hear the media pumping up the new highs for the markets, you should reflect on this indicator so that you don’t become a victim by chasing the market: https://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio



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