PE was 21.34 in Jan 1994 and 24.3 in dec 2023.

Recall that P/E ratio isn't useful at all as a market valuation metric unless the earnings are cyclically adjusted. They squiggle up and down too much for a snapshot to mean anything.

For the particular smoothing that I use, just a slight variation of CAPE with a bit more smoothing, earnings yield at start Jan 1994 was 5.240% like a P/E of 19.08.
At end January 2023 it was 3.285% like P/E of 30.44.

The real total return for this stretch was 7.387%/year.
Of that, 1.570%/year was the market getting more expensive as a multiple of smoothed real earnings.

Maybe there is a justifiable reason for that, maybe there isn't, but it definitely happened...the broad cap weight US market got a whole lot more expensive. About 60% higher, on these figures.

If the market can get more expensive at 1.57%/year for 30 years (with squiggles), then presumably it is not impossible for the market to get cheaper at 1.57%/year for 30 years (with squiggles).
That is definitely not a prediction, just a memento mori: various things are possible.


Yes, net profit margins also soared, so earnings soared relative to sales. But prices also soared even relative to the soaring earnings: the effects multiplied. This shows up most clearly and simply in the in the market-cap-to-GDP ratio. In this particular interval the ratio rose from about 66% to about 173%.

Jim