Fascinating chart showing what is about to drop off of Shiller’s CAPE, the 10 year earnings ratio; it has been a less than stellar measure of valuation, although you can make a case it gives you some insight as to potential future returns.
Here is Barron’s:
The CAPE, the cyclically adjusted price/earnings ratio made famous by Yale professor and Nobel laureate Robert Shiller (and also known as the Shiller P/E), is likely to fall by 10% over the next two years—even if there is no economic recession or bear market.
That’s because the 2008-09 financial crisis is about to drop out of the 10-year lookback period on which the CAPE focuses.
Here is the chart:
Source: Barron’s
