Current Market Valuation: Overvalued

We believe in fundamental valuation analysis as the basis of any investment, and made CMV as a resource to quickly and easily track long-term indicators of market valuation. These are presented with background and analysis to be accessible and educational for retail investors.

January 14, 2022: Our models average 1.45 standard deviations above trend, indicating S&P500 is Overvalued.

Recent Posts: Inflation vs. Interest Rates - Inflation is at a generational high point - how much longer can it outpace T-bond rates?

sponsored by Koyfin
Sponsored by Koyfin

Core Valuation Models

We currently track five different models to evaluate whether the US stock market is accurately priced, relative to long-term historical patterns and fundamental indicators. Each model is illustrated below, with much more detail available by clicking into each. Models are updated weekly, or as data becomes available.


Yield Curve Model: Fairly Valued

Summary

If the spread between the 10-year and 3-month Treasury yield is negative (when 3mo yield is higher than 10y), it is a bearish signal that is almost always followed by economic recession.

Last UpdatedDecember 31, 2021
10-Year Yield1.52%
3-Month Yield0.06%
Spread1.46%
Std Dev above trend0.04
RatingFairly Valued
Rating Last ChangedMarch 2020
About Our Ratings

Buffett Indicator Model: Strongly Overvalued

Summary

The ratio of the total value of the US stock market vs current GDP. Originally a favorite valuation indicator of Warren Buffett.

Last UpdatedJanuary 13, 2022
US Market Value$50.1T
US GDP$23.8T
Buffett Indicator211%
Historical Ave BI125%
Std Dev above trend2.1
RatingStrongly Overvalued
Rating Last ChangedApril 2021
About Our Ratings

P/E Ratio Model: Strongly Overvalued

Summary

This model tracks the aggregate price-to-earnings ratio of the S&P500, compared to its own historical trend.

Last UpdatedJanuary 14, 2022
P/E (CAPE) Ratio38.0
Historical Ave PE20.0
% above trend90%
Std Dev above trend2.3
RatingStrongly Overvalued
Rating Last ChangedMarch 2021
About Our Ratings

S&P500 Mean Reversion Model: Strongly Overvalued

Summary

This model simply assumes that over time the S&P500 will tend to revert back to its own long term trend line.

Last UpdatedJanuary 14, 2022
S&P500 Price$4,663
S&P500 Trend Price$2,589
% above trend74%
Std Dev above trend2.1
RatingStrongly Overvalued
Rating Last ChangedApril 2021
About Our Ratings

Interest Rate Model: Fairly Valued

Summary

For several reasons, low interest rates tend to push stock prices higher. This model considers current US stock market prices relative to US Treasury interest rates.

Last UpdatedJanuary 14, 2022
S&P500 Price$4,663
S&P500 SDs above trend2.1
10Y Yield1.70%
10Y SDs below trend1.4
RatingFairly Valued
Rating Last ChangedJune 2020
About Our Ratings
sponsored by Koyfin
Sponsored by Koyfin

Posts

Shorter form blog-style posts on various stock/economy related topics, but not limited to market valuation. These are generally not updated after they are posted.


November 2021

Inflation vs. Interest Rates

Inflation is at a generational high point - how much longer can it outpace T-bond rates?


November 2021

S&P500 P/E Ratio vs. Interest Rates

How does the S&P500 P/E ratio change relative to Treasury bond rates?


July 2021

Fed Balance Sheet vs. S&P500

A look at the recent expansion of the Federal Reserve balance sheet, and its correlation with recent stock performance.


March 2021

Junk Bond Yields

Junk bond yields are currently at historic lows.


September 2020

Federal Student Loan Crisis

Data exploring the exponential growth of unbankruptable federal student debt in the last twenty years.