A Long-term Look at Stocks and Bonds

By on August 23, 2010

Econbrowser has a very enlightening post entitled, “Long-term perspective on the stock market.” They look at 140 years of history from data compiled by Robert Shiller. One observation:

Despite the recent correction in stock prices, stocks still cost more today relative to the earnings you’re buying than they did over most of the previous century and a half. We’d still need about another 17% decline in stock prices to get back to the historical average valuation multiple.

What is pretty clear is that stocks can remain overvalued and undervalued relative to the average PE multiple for very long stretches of time.

There are some great charts and discussion at the source link below.

Source: Econbrowser
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