Investing Insights

Episode 12: Stock Valuations Are Sky High – What Comes Next?

Dan Irvine
Principal, 3Summit Investment, Management, LLC
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Note: If you would prefer the print version click here to read Investing Insights: Stock Valuations Are Sky High – What Comes Next?

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Investors are facing economic conditions that have not been seen for 40 years. This quarter, we will examine how to measure and evaluate stock market valuations and then identify the driving economic forces responsible for their rise to such significant levels. Finally, we will discuss the economic mechanisms that pull valuations back towards their mean, what indicators investors should be monitoring and what those indicators may foreshadow for stock prices and valuations going forward.

CAPE Ratio Equation

Historical CAPE Ratio (1870 – 2021)

Historical CAPE Ratio
Source: www.multpl.com/shiller-pe

How Fed Policy Has Impacted CAPE Ratio

How CAPE Ratio Got So High

Price Collapse Impact On CAPE Ratio

Effect of Price Collapse On CAPE Ratio

Inflation Impact On CAPE Ratio

3Summit Investment Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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