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CURRENT MARKET VALUATION Fed Balance Sheet vs S&P500. The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. Quantitative Easing is one such action. BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of June 3, 2021 we calculate the Buffett Indicator as 230%, which is about 2.7 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend to adhere to somewhat predictable upward trends. Deviations from the trend can lastyears, or
USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The P/E ratio is a classic measure of any security's value, indicating how many years of profits (at the current rate) it takes to recoup an investment in the stock. The current S&P500 10-year P/E Ratio is 37.5. This is 89% above the modern-era market average of 19.6, putting the current P/E 2.3 standard deviations above the modern-era average. YIELD CURVE VALUATION MODEL Theory. The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- and 1, 2, 3, 5, 7, 10, 20, and 30 years. These are bonds just like any other - meaning that if you bought $1,000 of the 10-year bonds with an interest rate INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION CURRENT MARKET VALUATION Over the last 20 years federal student loans in the USA have grown exponentially. Average debt per student loan borrower has risen from ~$11,000 to ~$35,000+ in under two decades, while median income (even amongst only those with at least college degrees) has risen tepidly. Combined, this has produced the terrifying chart below. CURRENT MARKET VALUATION Updated May 7, 2021 » The P/E ratio is a fundamental measure of any security's valuation, indicating how many years of current profits it takes to recoup an investment. The aggregate S&P500 P/E (CAPE) ratio is 37.7, which is 91% above the modern-era market average of 19.6, putting the current P/E over 2 standard deviations above the average. CURRENT MARKET VALUATION Current Market Valuation is meant to be used as an educational resource to help readers understand today's market in a historical perspective. This might be useful context to have when making investment decisions, but this is absolutely not presented as, orintended to
CURRENT MARKET VALUATION Fed Balance Sheet vs S&P500. The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. Quantitative Easing is one such action. BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of June 3, 2021 we calculate the Buffett Indicator as 230%, which is about 2.7 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend to adhere to somewhat predictable upward trends. Deviations from the trend can lastyears, or
USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The P/E ratio is a classic measure of any security's value, indicating how many years of profits (at the current rate) it takes to recoup an investment in the stock. The current S&P500 10-year P/E Ratio is 37.5. This is 89% above the modern-era market average of 19.6, putting the current P/E 2.3 standard deviations above the modern-era average. YIELD CURVE VALUATION MODEL Theory. The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- and 1, 2, 3, 5, 7, 10, 20, and 30 years. These are bonds just like any other - meaning that if you bought $1,000 of the 10-year bonds with an interest rate INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION CURRENT MARKET VALUATION Over the last 20 years federal student loans in the USA have grown exponentially. Average debt per student loan borrower has risen from ~$11,000 to ~$35,000+ in under two decades, while median income (even amongst only those with at least college degrees) has risen tepidly. Combined, this has produced the terrifying chart below. CURRENT MARKET VALUATION Updated May 7, 2021 » The P/E ratio is a fundamental measure of any security's valuation, indicating how many years of current profits it takes to recoup an investment. The aggregate S&P500 P/E (CAPE) ratio is 37.7, which is 91% above the modern-era market average of 19.6, putting the current P/E over 2 standard deviations above the average. CURRENT MARKET VALUATION Current Market Valuation is meant to be used as an educational resource to help readers understand today's market in a historical perspective. This might be useful context to have when making investment decisions, but this is absolutely not presented as, orintended to
CURRENT MARKET VALUATION Fed Balance Sheet vs S&P500. The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. Quantitative Easing is one such action. BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of June 3, 2021 we calculate the Buffett Indicator as 230%, which is about 2.7 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend to adhere to somewhat predictable upward trends. Deviations from the trend can lastyears, or
USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The P/E ratio is a classic measure of any security's value, indicating how many years of profits (at the current rate) it takes to recoup an investment in the stock. The current S&P500 10-year P/E Ratio is 37.5. This is 89% above the modern-era market average of 19.6, putting the current P/E 2.3 standard deviations above the modern-era average. YIELD CURVE VALUATION MODEL Theory. The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- and 1, 2, 3, 5, 7, 10, 20, and 30 years. These are bonds just like any other - meaning that if you bought $1,000 of the 10-year bonds with an interest rate CURRENT MARKET VALUATION This shows the historic spread between junk bonds and 10Y Treasury bonds. We're currently at ~2.7%, versus historical average of about 5%. It seems clear that in the next few years, either 10Y Treasuries will flatten further (though there is hardly anywhere left for them INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION Over the last 20 years federal student loans in the USA have grown exponentially. Average debt per student loan borrower has risen from ~$11,000 to ~$35,000+ in under two decades, while median income (even amongst only those with at least college degrees) has risen tepidly. Combined, this has produced the terrifying chart below. CURRENT MARKET VALUATION Updated May 7, 2021 » The P/E ratio is a fundamental measure of any security's valuation, indicating how many years of current profits it takes to recoup an investment. The aggregate S&P500 P/E (CAPE) ratio is 37.7, which is 91% above the modern-era market average of 19.6, putting the current P/E over 2 standard deviations above the average. CURRENT MARKET VALUATION Current Market Valuation is meant to be used as an educational resource to help readers understand today's market in a historical perspective. This might be useful context to have when making investment decisions, but this is absolutely not presented as, orintended to
S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend to adhere to somewhat predictable upward trends. Deviations from the trend can lastyears, or
BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of June 3, 2021 we calculate the Buffett Indicator as 230%, which is about 2.7 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION Fed Balance Sheet vs S&P500. The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. Quantitative Easing is one such action. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The P/E ratio is a classic measure of any security's value, indicating how many years of profits (at the current rate) it takes to recoup an investment in the stock. The current S&P500 10-year P/E Ratio is 37.5. This is 89% above the modern-era market average of 19.6, putting the current P/E 2.3 standard deviations above the modern-era average. YIELD CURVE VALUATION MODEL Theory. The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- and 1, 2, 3, 5, 7, 10, 20, and 30 years. These are bonds just like any other - meaning that if you bought $1,000 of the 10-year bonds with an interest rate INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION CURRENT MARKET VALUATION Over the last 20 years federal student loans in the USA have grown exponentially. Average debt per student loan borrower has risen from ~$11,000 to ~$35,000+ in under two decades, while median income (even amongst only those with at least college degrees) has risen tepidly. Combined, this has produced the terrifying chart below. CURRENT MARKET VALUATION Updated May 7, 2021 » The P/E ratio is a fundamental measure of any security's valuation, indicating how many years of current profits it takes to recoup an investment. The aggregate S&P500 P/E (CAPE) ratio is 37.7, which is 91% above the modern-era market average of 19.6, putting the current P/E over 2 standard deviations above the average. CURRENT MARKET VALUATION Current Market Valuation is meant to be used as an educational resource to help readers understand today's market in a historical perspective. This might be useful context to have when making investment decisions, but this is absolutely not presented as, orintended to
S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend to adhere to somewhat predictable upward trends. Deviations from the trend can lastyears, or
BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of June 3, 2021 we calculate the Buffett Indicator as 230%, which is about 2.7 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION Fed Balance Sheet vs S&P500. The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. Quantitative Easing is one such action. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The P/E ratio is a classic measure of any security's value, indicating how many years of profits (at the current rate) it takes to recoup an investment in the stock. The current S&P500 10-year P/E Ratio is 37.5. This is 89% above the modern-era market average of 19.6, putting the current P/E 2.3 standard deviations above the modern-era average. YIELD CURVE VALUATION MODEL Theory. The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- and 1, 2, 3, 5, 7, 10, 20, and 30 years. These are bonds just like any other - meaning that if you bought $1,000 of the 10-year bonds with an interest rate INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION CURRENT MARKET VALUATION Over the last 20 years federal student loans in the USA have grown exponentially. Average debt per student loan borrower has risen from ~$11,000 to ~$35,000+ in under two decades, while median income (even amongst only those with at least college degrees) has risen tepidly. Combined, this has produced the terrifying chart below. CURRENT MARKET VALUATION Updated May 7, 2021 » The P/E ratio is a fundamental measure of any security's valuation, indicating how many years of current profits it takes to recoup an investment. The aggregate S&P500 P/E (CAPE) ratio is 37.7, which is 91% above the modern-era market average of 19.6, putting the current P/E over 2 standard deviations above the average. CURRENT MARKET VALUATION Current Market Valuation is meant to be used as an educational resource to help readers understand today's market in a historical perspective. This might be useful context to have when making investment decisions, but this is absolutely not presented as, orintended to
S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend to adhere to somewhat predictable upward trends. Deviations from the trend can lastyears, or
BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of June 3, 2021 we calculate the Buffett Indicator as 230%, which is about 2.7 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION Fed Balance Sheet vs S&P500. The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. Quantitative Easing is one such action. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The P/E ratio is a classic measure of any security's value, indicating how many years of profits (at the current rate) it takes to recoup an investment in the stock. The current S&P500 10-year P/E Ratio is 37.5. This is 89% above the modern-era market average of 19.6, putting the current P/E 2.3 standard deviations above the modern-era average. YIELD CURVE VALUATION MODEL Theory. The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- and 1, 2, 3, 5, 7, 10, 20, and 30 years. These are bonds just like any other - meaning that if you bought $1,000 of the 10-year bonds with an interest rate INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION This shows the historic spread between junk bonds and 10Y Treasury bonds. We're currently at ~2.7%, versus historical average of about 5%. It seems clear that in the next few years, either 10Y Treasuries will flatten further (though there is hardly anywhere left for them CURRENT MARKET VALUATION Over the last 20 years federal student loans in the USA have grown exponentially. Average debt per student loan borrower has risen from ~$11,000 to ~$35,000+ in under two decades, while median income (even amongst only those with at least college degrees) has risen tepidly. Combined, this has produced the terrifying chart below. CURRENT MARKET VALUATION Updated May 7, 2021 » The P/E ratio is a fundamental measure of any security's valuation, indicating how many years of current profits it takes to recoup an investment. The aggregate S&P500 P/E (CAPE) ratio is 37.7, which is 91% above the modern-era market average of 19.6, putting the current P/E over 2 standard deviations above the average. CURRENT MARKET VALUATION Current Market Valuation is meant to be used as an educational resource to help readers understand today's market in a historical perspective. This might be useful context to have when making investment decisions, but this is absolutely not presented as, orintended to
S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend to adhere to somewhat predictable upward trends. Deviations from the trend can lastyears, or
BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of June 3, 2021 we calculate the Buffett Indicator as 230%, which is about 2.7 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION Fed Balance Sheet vs S&P500. The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. Quantitative Easing is one such action. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The P/E ratio is a classic measure of any security's value, indicating how many years of profits (at the current rate) it takes to recoup an investment in the stock. The current S&P500 10-year P/E Ratio is 37.5. This is 89% above the modern-era market average of 19.6, putting the current P/E 2.3 standard deviations above the modern-era average. YIELD CURVE VALUATION MODEL Theory. The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- and 1, 2, 3, 5, 7, 10, 20, and 30 years. These are bonds just like any other - meaning that if you bought $1,000 of the 10-year bonds with an interest rate INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION CURRENT MARKET VALUATION Over the last 20 years federal student loans in the USA have grown exponentially. Average debt per student loan borrower has risen from ~$11,000 to ~$35,000+ in under two decades, while median income (even amongst only those with at least college degrees) has risen tepidly. Combined, this has produced the terrifying chart below. CURRENT MARKET VALUATION Updated May 7, 2021 » The P/E ratio is a fundamental measure of any security's valuation, indicating how many years of current profits it takes to recoup an investment. The aggregate S&P500 P/E (CAPE) ratio is 37.7, which is 91% above the modern-era market average of 19.6, putting the current P/E over 2 standard deviations above the average. CURRENT MARKET VALUATION Current Market Valuation is meant to be used as an educational resource to help readers understand today's market in a historical perspective. This might be useful context to have when making investment decisions, but this is absolutely not presented as, orintended to
S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend to adhere to somewhat predictable upward trends. Deviations from the trend can lastyears, or
BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of June 3, 2021 we calculate the Buffett Indicator as 230%, which is about 2.7 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION Fed Balance Sheet vs S&P500. The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. Quantitative Easing is one such action. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The P/E ratio is a classic measure of any security's value, indicating how many years of profits (at the current rate) it takes to recoup an investment in the stock. The current S&P500 10-year P/E Ratio is 37.5. This is 89% above the modern-era market average of 19.6, putting the current P/E 2.3 standard deviations above the modern-era average. YIELD CURVE VALUATION MODEL Theory. The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- and 1, 2, 3, 5, 7, 10, 20, and 30 years. These are bonds just like any other - meaning that if you bought $1,000 of the 10-year bonds with an interest rate INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION CURRENT MARKET VALUATION Over the last 20 years federal student loans in the USA have grown exponentially. Average debt per student loan borrower has risen from ~$11,000 to ~$35,000+ in under two decades, while median income (even amongst only those with at least college degrees) has risen tepidly. Combined, this has produced the terrifying chart below. CURRENT MARKET VALUATION Updated May 7, 2021 » The P/E ratio is a fundamental measure of any security's valuation, indicating how many years of current profits it takes to recoup an investment. The aggregate S&P500 P/E (CAPE) ratio is 37.7, which is 91% above the modern-era market average of 19.6, putting the current P/E over 2 standard deviations above the average. CURRENT MARKET VALUATION Current Market Valuation is meant to be used as an educational resource to help readers understand today's market in a historical perspective. This might be useful context to have when making investment decisions, but this is absolutely not presented as, orintended to
S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend to adhere to somewhat predictable upward trends. Deviations from the trend can lastyears, or
BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of June 3, 2021 we calculate the Buffett Indicator as 230%, which is about 2.7 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION Fed Balance Sheet vs S&P500. The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. Quantitative Easing is one such action. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The P/E ratio is a classic measure of any security's value, indicating how many years of profits (at the current rate) it takes to recoup an investment in the stock. The current S&P500 10-year P/E Ratio is 37.5. This is 89% above the modern-era market average of 19.6, putting the current P/E 2.3 standard deviations above the modern-era average. YIELD CURVE VALUATION MODEL Theory. The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- and 1, 2, 3, 5, 7, 10, 20, and 30 years. These are bonds just like any other - meaning that if you bought $1,000 of the 10-year bonds with an interest rate INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION This shows the historic spread between junk bonds and 10Y Treasury bonds. We're currently at ~2.7%, versus historical average of about 5%. It seems clear that in the next few years, either 10Y Treasuries will flatten further (though there is hardly anywhere left for them CURRENT MARKET VALUATION Over the last 20 years federal student loans in the USA have grown exponentially. Average debt per student loan borrower has risen from ~$11,000 to ~$35,000+ in under two decades, while median income (even amongst only those with at least college degrees) has risen tepidly. Combined, this has produced the terrifying chart below. CURRENT MARKET VALUATION Interest Rate Model: Fairly Valued Updated May 28, 2021 » The 10Y Treasury bond rate is 1.61%, which is 1.5 standard deviations below normal, indicating stocks should be high. Likewise, the S&P500 value of $4,204 is 2.2 standard deviations above its own respective trendline. Summed together, this gives a composite value of 0.7 standard deviations above normal, indicating that stocks are CURRENT MARKET VALUATION CMV tracks several long term macroeconomic indicators, comparing current values to their historical norms. The methodology is explained in each model's individual page, but generally we're looking for the over/undervaluation of the indicator in terms of how many standard deviations the current value is from the historical norm. S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of May 27, 2021 we calculate the Buffett Indicator as 231%, which is about 2.8 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The current S&P500 10-year P/E Ratio is 37.2. This is 88% above the modern-era market average of ~19.6, putting the current P/E 2.2 standard deviations above the modern-era average, indicating that the stock market is Strongly Overvalued. YIELD CURVE VALUATION MODEL The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- CURRENT MARKET VALUATION INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION Accelerating Debt. The problem isn't entirely due to rising tuition costs, either. Tuition costs have indeed risen sharply; across all public, private, and for-profit institutions tuition has doubled in the last 17 years, far outpacing general inflation. CURRENT MARKET VALUATION Interest Rate Model: Fairly Valued Updated May 28, 2021 » The 10Y Treasury bond rate is 1.61%, which is 1.5 standard deviations below normal, indicating stocks should be high. Likewise, the S&P500 value of $4,204 is 2.2 standard deviations above its own respective trendline. Summed together, this gives a composite value of 0.7 standard deviations above normal, indicating that stocks are CURRENT MARKET VALUATION CMV tracks several long term macroeconomic indicators, comparing current values to their historical norms. The methodology is explained in each model's individual page, but generally we're looking for the over/undervaluation of the indicator in terms of how many standard deviations the current value is from the historical norm. S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of May 27, 2021 we calculate the Buffett Indicator as 231%, which is about 2.8 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The current S&P500 10-year P/E Ratio is 37.2. This is 88% above the modern-era market average of ~19.6, putting the current P/E 2.2 standard deviations above the modern-era average, indicating that the stock market is Strongly Overvalued. YIELD CURVE VALUATION MODEL The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- CURRENT MARKET VALUATION INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION Accelerating Debt. The problem isn't entirely due to rising tuition costs, either. Tuition costs have indeed risen sharply; across all public, private, and for-profit institutions tuition has doubled in the last 17 years, far outpacing general inflation. CURRENT MARKET VALUATION Interest Rate Model: Fairly Valued Updated May 28, 2021 » The 10Y Treasury bond rate is 1.61%, which is 1.5 standard deviations below normal, indicating stocks should be high. Likewise, the S&P500 value of $4,204 is 2.2 standard deviations above its own respective trendline. Summed together, this gives a composite value of 0.7 standard deviations above normal, indicating that stocks are CURRENT MARKET VALUATION CMV tracks several long term macroeconomic indicators, comparing current values to their historical norms. The methodology is explained in each model's individual page, but generally we're looking for the over/undervaluation of the indicator in terms of how many standard deviations the current value is from the historical norm. S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of May 27, 2021 we calculate the Buffett Indicator as 231%, which is about 2.8 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The current S&P500 10-year P/E Ratio is 37.2. This is 88% above the modern-era market average of ~19.6, putting the current P/E 2.2 standard deviations above the modern-era average, indicating that the stock market is Strongly Overvalued. YIELD CURVE VALUATION MODEL The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- CURRENT MARKET VALUATION Worth Noticing. Junk Bond rates are historically low, around 4%. This is less than half of the historical average rate (around 9%). Junk bonds (like most other interest rates) INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION Accelerating Debt. The problem isn't entirely due to rising tuition costs, either. Tuition costs have indeed risen sharply; across all public, private, and for-profit institutions tuition has doubled in the last 17 years, far outpacing general inflation. CURRENT MARKET VALUATION Interest Rate Model: Fairly Valued Updated May 28, 2021 » The 10Y Treasury bond rate is 1.61%, which is 1.5 standard deviations below normal, indicating stocks should be high. Likewise, the S&P500 value of $4,204 is 2.2 standard deviations above its own respective trendline. Summed together, this gives a composite value of 0.7 standard deviations above normal, indicating that stocks are CURRENT MARKET VALUATION CMV tracks several long term macroeconomic indicators, comparing current values to their historical norms. The methodology is explained in each model's individual page, but generally we're looking for the over/undervaluation of the indicator in terms of how many standard deviations the current value is from the historical norm. S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of May 27, 2021 we calculate the Buffett Indicator as 231%, which is about 2.8 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The current S&P500 10-year P/E Ratio is 37.2. This is 88% above the modern-era market average of ~19.6, putting the current P/E 2.2 standard deviations above the modern-era average, indicating that the stock market is Strongly Overvalued. YIELD CURVE VALUATION MODEL The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- CURRENT MARKET VALUATION INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION Accelerating Debt. The problem isn't entirely due to rising tuition costs, either. Tuition costs have indeed risen sharply; across all public, private, and for-profit institutions tuition has doubled in the last 17 years, far outpacing general inflation. CURRENT MARKET VALUATION Interest Rate Model: Fairly Valued Updated May 28, 2021 » The 10Y Treasury bond rate is 1.61%, which is 1.5 standard deviations below normal, indicating stocks should be high. Likewise, the S&P500 value of $4,204 is 2.2 standard deviations above its own respective trendline. Summed together, this gives a composite value of 0.7 standard deviations above normal, indicating that stocks are CURRENT MARKET VALUATION CMV tracks several long term macroeconomic indicators, comparing current values to their historical norms. The methodology is explained in each model's individual page, but generally we're looking for the over/undervaluation of the indicator in terms of how many standard deviations the current value is from the historical norm. S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of May 27, 2021 we calculate the Buffett Indicator as 231%, which is about 2.8 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The current S&P500 10-year P/E Ratio is 37.2. This is 88% above the modern-era market average of ~19.6, putting the current P/E 2.2 standard deviations above the modern-era average, indicating that the stock market is Strongly Overvalued. YIELD CURVE VALUATION MODEL The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- CURRENT MARKET VALUATION INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION Accelerating Debt. The problem isn't entirely due to rising tuition costs, either. Tuition costs have indeed risen sharply; across all public, private, and for-profit institutions tuition has doubled in the last 17 years, far outpacing general inflation. CURRENT MARKET VALUATION Interest Rate Model: Fairly Valued Updated May 28, 2021 » The 10Y Treasury bond rate is 1.61%, which is 1.5 standard deviations below normal, indicating stocks should be high. Likewise, the S&P500 value of $4,204 is 2.2 standard deviations above its own respective trendline. Summed together, this gives a composite value of 0.7 standard deviations above normal, indicating that stocks are CURRENT MARKET VALUATION CMV tracks several long term macroeconomic indicators, comparing current values to their historical norms. The methodology is explained in each model's individual page, but generally we're looking for the over/undervaluation of the indicator in terms of how many standard deviations the current value is from the historical norm. S&P500 MEAN REVERSION MODEL Mean Reversion. Mean reversion is the fairly unsophisticated concept that "what goes up must come down". It is generally true that while the day-to-day movements of the stock market are chaotic and unpredictable, long term stock market returns tend BUFFETT INDICATOR VALUATION MODEL The Buffett Indicator is the ratio of total US stock market valuation to GDP. As of May 27, 2021 we calculate the Buffett Indicator as 231%, which is about 2.8 standard deviations above the historical average, suggesting that the US stock market is Strongly Overvalued. CURRENT MARKET VALUATION The balance sheet of the Federal Reserve (shown on right axis) has increased very substantially in 2020. After the Fed cut interest rates to zero, there is a very limited amount of actions they can take to further juice the economy. USING P/E RATIO TO DETERMINE CURRENT US STOCK MARKET VALUATION The current S&P500 10-year P/E Ratio is 37.2. This is 88% above the modern-era market average of ~19.6, putting the current P/E 2.2 standard deviations above the modern-era average, indicating that the stock market is Strongly Overvalued. YIELD CURVE VALUATION MODEL The yield curve refers to the chart of current pricing on US Treasury Debt instruments, by maturity. The US Treasury currently issues debt in maturities of 1, 2, 3, and 6 months -- CURRENT MARKET VALUATION Worth Noticing. Junk Bond rates are historically low, around 4%. This is less than half of the historical average rate (around 9%). Junk bonds (like most other interest rates) INTEREST RATE VALUATION MODEL Interest Rates. Figure 1 below shows the Ten Year Treasury Bond rate over the last ~60 years, from 1962 to present day. Rates spiked in the '70s and '80s as a response to high inflation at the time, and since then have been on a pretty steady downward trajectory. CURRENT MARKET VALUATION Accelerating Debt. The problem isn't entirely due to rising tuition costs, either. Tuition costs have indeed risen sharply; across all public, private, and for-profit institutions tuition has doubled in the last 17 years, far outpacing general inflation. Current Market Valuation* Home (current)
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CURRENT MARKET VALUATION: OVERVALUED We believe in fundamental valuation analysis as the basis of any investment, and made CMV as a resource to quickly and easily track long-term indicators of market valuation. These are presented with background and analysis to be accessible and educational for retailinvestors.
JUNE 4, 2021: Our models average 1.6 standard deviations above trend, indicating S&P500 is OVERVALUED.FEATURED IN:
------------------------- CORE VALUATION MODELS We currently track five different models to evaluate whether the US stock market is accurately priced, relative to long-term historical patterns and fundamental indicators. Each model is illustrated below, with much more detail available by clicking into each. Models are updated weekly, or as data becomes available. ------------------------- YIELD CURVE MODEL: FAIRLY VALUED UPDATED MAY 28, 2021 » The spread between 10-Year and 3-Month US Government debt was recently negative, illustrating an inverted yield curve. Historically, this has been a very reliable indicator of a recession in the following ~12-24 months after inversion, and recessions correlate with lower stock market returns. The last time this happened was 2006, right before the financial crisis. Before that: 2000, before the .com bust. In the last 50 years this indicatorhasn't been wrong.
More Info: Yield Curve » ------------------------- BUFFETT INDICATOR MODEL: STRONGLY OVERVALUED UPDATED JUNE 3, 2021 » The Buffett Indicator (named after Warren Buffett, who claims this as a favorite macroeconomic indicator) is the ratio of total US stock market valuation to GDP. It is currently at 230%, which is 84% (~2.7 standard deviations) higher than its historical trend line, indicating the market is currently StronglyOvervalued.
More Info: Buffett Indicator » ------------------------- P/E RATIO MODEL: STRONGLY OVERVALUED UPDATED JUNE 4, 2021 » The P/E ratio is a fundamental measure of any security's valuation, indicating how many years of current profits it takes to recoup an investment. The aggregate S&P500 P/E (CAPE) ratio is 37.3, which is 89% above the modern-era market average of 19.6, putting the current P/E over 2 standard deviations above the average. This indicates that the market is Strongly Overvalued. More Info: Price/Earnings » ------------------------- MEAN REVERSION MODEL: STRONGLY OVERVALUED UPDATED JUNE 4, 2021 » The S&P500 is currently trading 78% above its modern-era historical trendline, indicating that the market is Strongly Overvalued. More Info: S&P Mean Reversion » ------------------------- INTEREST RATE MODEL: FAIRLY VALUED UPDATED JUNE 4, 2021 » The 10Y Treasury bond rate is 1.63%, which is 1.5 standard deviations below normal, indicating stocks should be high. Likewise, the S&P500 value of $4,230 is 2.2 standard deviations above its own respective trendline. Summed together, this gives a composite value of 0.8 standard deviations above normal, indicating that stocks are currently Fairly Valued when considering currentinterest rates.
More Info: Interest Rate Model » ------------------------- -------------------------POSTS
Shorter form blog-style posts on various stock/economy related topics, but not limited to market valuation. These are generally not updated after they are posted. -------------------------March 2021
JUNK BOND YIELDS
Junk bond yields are currently at historic lows. -------------------------February 2021
FED BALANCE SHEET VS. S&P500 A look at the recent expansion of the Federal Reserve balance sheet, and its correlation with recent stock performance. -------------------------September 2020
FEDERAL STUDENT LOAN CRISIS Data exploring the exponential growth of unbankruptable federal student debt in the last twenty years. -------------------------Back to top
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