Stock Market Valuations Have Fallen from Peak but Remain Very High Historically, Suggesting Subdued Returns Ahead
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The stock market today is slightly less overvalued than at the January 2022 peak, but still historically very expensive by most measures.
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Valuation indicators like the CAPE ratio have fallen from extreme levels in early 2022, but remain higher than over 90% of historical readings.
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Stock returns predicted by valuation models today are better than in January 2022, but still quite low - only 0.7% above inflation over 10 years.
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Valuations have limited ability to predict short-term market moves; decent returns are possible over next few quarters.
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Despite recent drops, valuations don't yet indicate stocks are cheap enough to support a new secular bull market.