Market Update

Econbrowser has a great analysis of where we stand market valuation wise. Using Prof Shiller's data he posts the following charts:
(1) 17% downside to be back to average

(2) A chart comparing PE and the following 10 year nominal returns of the S&P500. At the current PE do not expect much in the next years if history is any guide



(3) And among others a chart comparing the dividend yields vs tips' and bond yields.
While equities do not strike as bargains they still compare favourably to bonds.


He concludes: "A buyer of stocks today is usually getting a higher immediate yield than on TIPS, in addition to prospects of future dividend growth. Just as they did in the 19th century, stocks as priced today should give you a significantly better return than bonds"

Stocks vs Bonds

Brad De Long comments on Authers from the FT, adds this great chart:
and posts "Of course, going forward the current value of the Graham Ratio--of stock prices to the ten-year lagged moving average of real earnings--predicts that stocks will beat ten-year Treasuries by an average of 7.5% per year over the next decade..."