[quote=henrysd]
CAPE is only one measurement of stock market valuation just like SAT test scores used in college admission. It has serious flaw – it fails to consider the interest rate. Early 80 CAPE can’t compared with current time CAPE due to 10% difference in interest rate. Vanguard uses a modified version of CAPE called fair-value CAPE and adjust for current interest rate. In Vanguard research, current U.S. stock market is still considered overvalued, but only slightly due to low interest rate. This is in sharp comparison with many other pure CAPE modelers: https://vanguardblog.com/2019/03/13/what-fed-projections-may-mean-for-longer-term-stock-returns/
Contrarian view is negative stock marker sentiment is bullish for stocks. For the last half year the sentiment was mostly bearish with all the recession talk. Wall street would love to propel the market higher when so much retail investor money has sidelined.[/quote]
Thanks henry, that’s exactly the kind of insight I was looking for. Do you know if there’s any site that maintains the current value of the modified CAPE?
