Should you be worried about a high CAPE ratio?
A recent article in Advisor Perspectives highlighted how high CAPE ratios have historically resulted in low S&P 500 returns.
Chart Source: https://go.astoriaadvisors.com/e/939763/pe-as-a-predictor-of-returns-1/c17525/1456001806?h=FzF4fHaPa0AKxwM7jliJ6EzoqMpPPbGzFh7BCjih5uc
The Shiller PE ratio is something that is fiercely debated in the investment community. My takeaway:
Don't obsess over it but keep it in the big picture.
It's a great tool to assess the state of affairs with regards to valuations, but hard to manage portfolios as it is not great at timing.
There are more effective valuation and risk management techniques that better serve for managing portfolios.
The larger concern that I have for markets is that we have likely reached peak sentiment.
What is the catalyst to take markets higher when we have:
Allocations at all time highs
Earnings growth & macro data have skyrocketed off of the March 2020 lows
See the following tweets that I have sent out in recent weeks:
Astoria Portfolio Advisors