Bubble Trouble: An Update On Market Valuations

Bubble Trouble: An Update On Market Valuations by Brad McMillan, Commonwealth Financial Network

Back in February, I looked at U.S. market valuations based on several different metrics, concluding that valuations were quite high—at or above the levels that prevailed before major corrections.

This morning, I was reviewing several data points and realized that valuations had evolved even higher in some cases, meaning that it’s time for an update. As I’ve said many times, this isn’t necessarily a sign of trouble, particularly in the short to medium term, but it’s worth keeping an eye on.

Shiller P/E stabilizes

Let’s start with the Shiller price/earnings ratio, which uses current prices and 10-year average earnings. This metric has leveled off since February and remains...