I update market valuations on a monthly basis. The point of this article is to measure the stock market based on seven different metrics. This article does not look at the macro picture and try to predict where the economy is headed. It only uses these several metrics which have been very good past indicators of whether the market is fairly valued.
This month I added in GMO’s chart at the bottom. The GMO chart shows what the firm expects different asset classes to return over the next seven years.
I collaborate with two colleagues of mine for some of the data in this article, Doug Short of dshort.com and my friend who runs seekingdelta. Both are great sites, and I encourage readers to check them out.
As always, I must mention that just because the market is over or undervalued does not mean that future returns will be high or low. From the mid to late 1990s the market was extremely overvalued and equities kept increasing year after year. However, as I note at the end of the article, I expect low returns over the next ten years based on current valuations. In addition, individual stocks can be found that will outperform or underperform the market regardless of current valuations.
To see my previous market valuation article from last month, click here.
Below are six different market valuation metrics as of February 2nd, 2011:
The current P/E TTM is 16.8, which is slightly higher than the TTM P/E of 16.6 from last month (This specific data is from the market close February 1st).
click to enlarge
No comments:
Post a Comment