Robert Shiller makes a case for why equity valuations may remain at higher levels for longer

James Marlay

Livewire Markets

Robert Shiller makes a case for why equity valuations may remain at higher levels for longer. Shiller developed The CAPE ratio (cyclically adjusted price-earnings.) which has a 20th-century average of 15.21. Today CAPE is above 25, a level that has been surpassed since 1881 in only three previous periods: the years clustered around 1929, 1999 and 2007. Major market drops followed those peaks. Shiller says the ratio was not designed to predict market crashes, however, he says it provides useful reference for periods of elevated asset prices. In this article Shiller explores some potential explanations as to why we might be entering a period of extended high equity valuations. A decent read from the NY Times and quite topical given all the press around high valuations and bubble talk. (VIEW LINK)

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James Marlay
Co Founder
Livewire Markets

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