Is The US Stock Market Overvalued? Depends On Which Model You Ask

Ted

FYI: To answer this question, investors have developed several alternative equity valuation models. Typically, each of these models compares the stock market’s current price level to a benchmark. Among practitioners, two of the leading equity valuation models are the Shiller CAPE model and the so-called Fed model. Thought leaders in the space debate the merits of the different approaches. For example, at the 70th Annual CFA Institute Conference in 2017, there was a heated debate between Robert Shiller and Jeremy Siegel on whether the US stock market is overvalued(1). On the one hand, Robert Shiller, the distinguished Yale economist and Nobel Laureate, claimed that the US stock market is highly overvalued judging by the current CAPE ratio. On the other hand, Jeremy Siegel, the author of “Stocks for the Long Run”, remarked that, given the extremely low-interest rates, the US stock market is not overvalued. Janet Yellen, the previous Fed Chair, held the same opinion as Jeremy Siegel. In particular, at the end of 2017, she said that “the low-rate environment is supportive of higher CAPE ratio.” Apparently, both Jeremy Siegel and Janet Yellen use the Fed model to determine whether the US stock market is overvalued.
Regards,
Ted
https://alphaarchitect.com/2018/03/15/graham-vs-shiller-us-stock-market-overvalued/

bee

Here one a way of looking at Valuation Globally.
https://starcapital.de/en/research/stock-market-valuation/

Once on the site, scroll to this interactive chart ( I captured an image of it below) which does a nice job of uncovering undervalued area in the US as well as globally. Undervalued global sectors (US and Non-US) are the Banks, Oil & Gas, & Autos.

davidrmoran

Cites I have given in the past and recently from GS, PIIE, ML, and maybe one other have regularly indicated that CAPE is (and has been shown to be) on the conservative side, I believe.