This tag examines the valuation metrics of financial assets: equity risk premium, valuation multiples, credit spreads, relative richness across asset classes. It is not about predicting prices but about understanding what prices embed as assumptions on growth, inflation and risk. Valuation is a starting point, not a forecast.
GDP growth does not reflect equity performance. The aggregate measure conflates productive and unproductive activity, while indices price concentrated future profits. Growth composition and timing lags make any direct correlation misleading.
Equity markets respond less to overall economic conditions than to the trajectory of corporate profits. Margins, pricing power and international revenue exposure explain why indices can diverge persistently from domestic GDP.
Credit availability, leverage and liquidity shape asset prices well beyond fundamentals. The procyclical loop linking financing conditions to valuations amplifies both expansion and correction phases.
The CAPE has never enjoyed full academic consensus. The most structured critique comes from Jeremy Siegel who, in his 2016 paper “The Shiller CAPE Ratio: A New Look,” identifies three major methodological biases: the 2001 FASB 142 accounting break, the…
In May 2026, the S&P 500 CAPE oscillates around 35-40 per Shiller Online Data — the ratio’s third durable passage above the 30 threshold in 145 years after 1929 and 1999, in a configuration combining extreme equity valuation and positive…
Formalized by Shiller, Black and Jivraj in their 2020 paper “CAPE and the COVID-19 Pandemic Effect,” the Excess CAPE Yield (ECY) corrects a weakness of the pure CAPE by integrating the 10-year Treasury real yield — an operational metric of…
Seven inflection points structure the Shiller series since 1881: 1920 trough at 4.78, 1929 peak at 32.56, 1932 Depression trough at 5.57, 1966 peak at 24.1, 1982 Volcker trough at 6.64, 1999 dot-com peak at 44.19 (absolute record), 2009 GFC…
Three equity valuation measures circulate continuously in financial commentary and are regularly conflated: the CAPE (P/E on 10-year real earnings), the trailing P/E (on GAAP earnings of the last 12 months) and the forward P/E (on consensus sell-side earnings projected…
Behind the acronym CAPE — Cyclically Adjusted Price-Earnings — sits a calculation of remarkable simplicity: real S&P 500 price as numerator, arithmetic mean of the previous ten years’ real earnings as denominator, double CPI deflation on both terms, series back-calculated…
An academic valuation ratio formalized by Robert Shiller in 1988 and popularized by Irrational Exuberance in 2000, the CAPE — S&P 500 price-to-earnings divided by the 10-year average of real earnings — concentrates since 1881 the most robust documented predictive…
