No. of Recommendations: 9
mungofitch wrote (using 7-year CAPE):
As an alternative view, quintiles of CAPE, 1960-2018, and one year forward US stock returns for dates starting in that valuation quintile:
Most expensive 1/5 of the time: 3.1%
Next 1/5: 7.6%
Next 1/5: 7.8%
Next 1/5: 13.1%
Cheapest 1/5 of the time: 18.7% Something changed around 1991. Comparing earnings yields before and after 1991 is suspect. In 1991, the S&P 500 price increased 26% while earnings dropped.
Year Earnings Yield Dividend Yield S&P 500 Earnings Dividends changeP changeE
1960 5.34% 3.41% 58.11 3.10 1.98
...
1989 6.80% 3.32% 353.40 24.32 11.73
1990 6.58% 3.74% 330.22 22.65 12.35 -7% -7%
1991 4.58% 3.11% 417.09 19.30 12.97 26% -15%
1992 4.16% 2.90% 435.71 20.87 12.64 4% 8%
1993 4.25% 2.72% 466.45 26.90 12.69 7% 29%
...
data from S&P Earnings: 1960-Current (raw data from Bloomberg and S&P).
pages.stern.nyu.edu - New Home PageUsing Shiller CAPE data, the S&P 500 earnings yield (trailing 1-year) averaged 8.0% from 1871 to 1989, and 4.6% from 1990 to 2025:
From To years Avg SD
1871 2025 155 7.2% 2.7%
1871 1989 119 8.0% 2.6%
1990 2025 36 4.6% 1.2%
There was an extra Price doubling around 1990:
Real S&P 500: E From To P From To
flat 1870 1880
flat 1870 1895
doubled 1880 1900
doubled 1895 1905
flat 1900 1950
flat 1905 1950
doubled 1950 1965 doubled 1950 1985
flat 1965 1995 doubled 1985 1995
doubled 1995 2005 doubled 1995 2000
doubled 2005 2025 flat 2000 2012
doubled 2012 2020
