- The CAPE ratio shows when something is cheap or expensive and is much more precise than the PE ratio.
- The S&P 500 is 74% overvalued and will result in negative 10-year returns according to the CAPE ratio and history.
- However, there is plenty that can be done to improve your returns.
Whether you’re a long-term investor or a trader, something that gives you a clue on the long-term trend around a security or sector is always very useful. Such a ratio was developed by Yale professor Robert Shiller and he didn’t get a Nobel prize for nothing, the CAPE ratio really works.
Today, I’ll describe it, show how it can be used, and analyze its past performance. More →