Ignoring the hype title, I haven't seen a comparison of this nature before:
And this reminder of market timing dangers:...an equally sobering picture is painted when we compare the current market not to historical averages but to just those past occasions when equities were at the top of a bull market.
I had not seen a comparison to past peak markets before. So I looked at the PE1 data from Shiller. That seemed to agree with Hulbert's data for about 10 past peak bull markets. See my table below which shows some past bull peaks and PE1 data. My guess is about PE1=24 (from my way of using the Shiller data). Then I added the 5 year Treasury yield to the table. Well, as we know the yields are extremely low right now.To be sure, valuation indicators are not helpful guides to the market’s shorter-term direction. Overvalued markets can stay overvalued for some time, and even become more overvalued. But value eventually wins out.
For example, it was in December 1996 that Yale’s Professor Shiller gave his now-famous lecture to the Federal Reserve about irrational exuberance. His analysis struck many as silly during the subsequent three years in which stocks continued to soar; when the dot-com bubble hit he looked like a genius — and he eventually was awarded the Nobel prize.
So my question is, are the current high market valuations just a reflection of high valuations for stock's competitive alternative -- bonds?
And a perhaps more difficult (unanswerable?) question: shouldn't we expect the valuations to stay relatively high if rates just go up very gradually? Very gradually being maybe 1 or 2 quarter point increases per year.