Irrational Exuberance or something else
Sanjeev Maddila
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Sanjeev Maddila
WW Head Supply Chain Solutions @Amazon Web Services | ex-Accenture and ex-Deloitte | Founder-SUMPURA | IIT-Kanpur & UIUC
US Stock market has been on a tear for the past year ... everyone wants to know how long can this party go on? Many suspect it is ready for a major correction and its only a matter of time, could happens before the end of 2017 or sometime in 2018.
One key leading indicator called Cyclically Adjusted PE Ratio (CAPE Ratio), also also known as the Shiller PE ratio for the S&P 500, proposed by Robert Shiller, in his book Irrational Exuberance. Its the Price to Earnings ratio based on average inflation-adjusted earnings from the previous 10 years.
(as of Mon Oct 23, 2017) the CAPE Ratio is 31.30, 2X the mean and median values over the past 140 years. So, be warned and take care.
Global Digital Transformation Leader
7 年Sanjiv, I'm starting to think that fundamentals are not the only thing that we should look at. World capital flows probably contribute significantly as other pools of quality dry up or the yield vanishes - as what has happened in the ultra-low interest rate environment we find ourselves in. So capital is jut seeking safety, quality and yield. I believe that this factor has become more over-weighted in the last couple of years and that's why people are scratching their heads asking why the market is still on fire. I'm interested to see how the great unwind is going to happen. I'm much more worried about that