A reminder that valuations are NOT short-term timing tools. The purpose of monitoring and understanding stock market valuation data is so we can build more accurate financial projections using more realistic assumptions (and therefore make better financial decisions) and to assist with longer-term investment strategy (i.e. 10-12 year time horizons).
In short, folks who are chasing performance higher at current levels by adding more stocks to their portfolios and/or buying low-quality, money-losing companies at extreme prices are either (1) ignorant to market history, or (2) understand the history but are rationalizing today’s dislocations with “this time is different” or, (3) they simply believe they are smart enough to get out in time.
Let’s take a look at the big picture of U.S. stock market valuations that are more excessive than they’ve ever been in history exceeding even the pre-Great Depression peak at the end of the Roaring Twenties and the Dot-Com Bubble Peak.