The Equity Market May Be Expensive But We Don't Know When The S&P 500 Will Selloff

Recently, the S&P 500 is trading at a level not seen since early 1998, when the S&P 500 broke 1,000 for the first time. The market’s current normalized price to earnings ratio stands at around 29.1, the last time such a valuation was seen was in 1998, and the market went on to rally by 50%. There are only two periods in history when the Equity Market has been as expensive as it is today using a normalized price to earnings ratio.

Barring the dot-com bubble, the first occurrence of this anomaly was in 1929 when the market charged to a cyclically adjusted valuation of 30 times earnings before collapsing and starting the great depression. However, around 70 years...