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The Stock Market
The Cult of Equity. A historical perspective of the stock market – as provided by US economics professor Robert Shiller – shows just how much more stocks have been valued in recent years in relation to corporate earnings. Even after recent falls, US equities may still be seriously overpriced. Robert Shiller’s 10-yr real adjusted P/E ratio on the S&P500, which uses ten year smoothed earnings, sits at 20; at the TOP of its range if the pre-first great depression spike in 1929 and Nasdaq 2000 spike are taken out. Equities will look cheap at P/E ratio of 6-8 on this metric.