~ Un-Common Sense In An Irrational World: We Challenge the Conventional WisdomTM ~
IS THE MARKET OVERVALUED?
The stock market, as measured by the S&P 500 (the broadest popular market index), hit its longest winning streak in more than a year, closing at 7609.78 on Tuesday. The market traded down a little yesterday, but is back up mid-day today.
Is the market overvalued?
We like to refer to the analysis done periodically by Advisor Perspectives to get a good perspective on market valuation. So, is the market overvalued? According to Advisor Perspectives, “Based on May’s S&P 500 monthly data, the market is OVERVALUED somewhere in the range of 123% to 207%, depending on the indicator. This is the highest overvaluation range in our series’ history.” You can read more on their assessment of market valuation at Advisor Perspectives – Market Valuation.
It is important to remember, though, that markets can stay overvalued for long periods of time. As Advisor Perspectives points out: “…these indicators aren’t useful as short-term signals of market direction. Periods of over- and under-valuation can last for many years. However, they can play a role in framing longer-term expectations of investment returns.”