Thread: Investing Using The Price-To-Earnings Ratio And Earnings Yield (Backtests 1951 To 201

The S&P 500 cycle-adjusted P/E is now 29.9 and 75% above its long-term average. I'm actually surprised it wasn't lower at the March lows.

Critics say this doesn't bode well for long term investors. What's one supposed to do? Sit in cash until the P/E drops below the line?

I'll make the argument that there are many, many, many more dollars chasing stocks today than even 2000 thanks to globalization.

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Originally Posted by Bullitt

I'll make the argument that there are many, many, many more dollars chasing stocks today than even 2000 thanks to globalization.

Completely agree. I'm not saying we are safe at these levels, but I also don't think it's fair to compare P/E and other fundamentals to the early 1900s when the world was so different. We have exponentially quicker access to anything we could ever want. Liquidity, information, trade, employees, leaders, marketing/advertising, capital investments.... all of these things can be had in a day now when 100 years ago it took weeks or months. I would imagine that has to have some effect on fundamentals.