We finally got that 10% correction we’ve all been waiting for. Last week’s volatility finally put us into official correction territory for the first time since 2011. It also gave us one of the biggest intraday swoons in market history as the Dow dropped by over 1,000 points last Monday. So after the August carnage, is the stock market finally cheap again? Not even close. Let’s take a look at the cyclically-adjusted price earnings ratio (“CAPE”), a popular back-of-the-envelope metric used by many value investors – myself included – to gauge the overall cheapness of the market. And as you can see from the chart below, last week’s carnage barely made a dent.
The CAPE, at 25.2, is still sitting at elevated levels. That’s more than 50% higher than the long-term average. Data site GuruFocus crunched the numbers, and a CAPE reading at these levels implies that returns over next eight years will be a pitiful 0.5% per year. Now I should be clear here: CAPE is not a forecasting tool with surgical precision. Mixing metaphors a little here, I’d consider it more of a hand grenade than a sniper rifle. This model is designed to give a rough estimate, and I do not for a second believe that annual stock returns will be exactly 0.5% per year. But I’m pretty comfortable saying that, at the very least, we should expect returns to be a little on the disappointing side starting at today’s prices.
Source: Charles Sizemore
Related Articles:
- 10 Stocks Building Wealth Through Higher Dividends
- 10 Dividend Stocks With A 10% Yield In 10 Years
- Are ETFs and CEFs Good Dividend Growth Investments?
- 6 Companies With The Power of 5/15 Dividend Growth
- 9 High Rated, Lower Debt Dividend Stocks With A Reasonable Payout
Dividend Growth Stocks News
- 3 Top High-Yield Dividend Stocks to Buy and Hold Through at Least the End of the Decade - The Motley Fool - 5/28/2025
- 3 UK Dividend Stocks Yielding Over 4% - Yahoo Finance - 5/28/2025
- Asian Dividend Stocks To Consider For Your Portfolio - Yahoo Finance - 5/28/2025
- 3 Safe Ultra-High-Yield Dividend Stocks to Buy and Hold for a Lifetime of Passive Income - Yahoo Finance - 5/27/2025
- Alexandria Real Estate, Altria and Dow Inc. Are Big Dividend Stocks That Are Poised to Soar - MSN - 5/27/2025
- AFLAC Incorporated (AFL) Dividend Stock Analysis - 5/23/2025
- Automatic Data Processing Inc. (ADP) Dividend Stock Analysis - 5/16/2025
- Air Products and Chemicals Inc. (APD) Dividend Stock Analysis - 5/9/2025
- Waste Management, Inc. (WM) Dividend Stock Analysis - 5/2/2025
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis - 4/25/2025
After the Correction… Are Stocks Cheap?
Posted by D4L | Wednesday, September 23, 2015 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.