The S&P 500 Just Did Something Seen Only 1 Other Time Since 1871 — and It's Not Good News for Wall Street
The stock market is making history, but not necessarily in a good way.
Overview
Yale economics professor Robert Shiller developed one of the best stock market valuation metrics ever -- the cyclically adjusted price-to-earnings (CAPE) ratio. This ratio measures overall market price-to-earnings multiples, but with a twist. Instead of only looking at earnings over the last four quarters, it uses a 10-year moving average of inflation-adjusted earnings.
Shiller has analyzed U.S. stock market CAPE ratios going back to 1871. That date is well before the creation of the S&P 500 (SNPINDEX:^GSPC) in 1957. However, the widely followed index and Shiller's valuation metric have become intertwined, resulting in the S&P 500 Shiller CAPE ratio.
Details
I give you this history as background to introduce a recent development. The S&P 500 -- and more specifically, the S&P 500 Shiller CAPE ratio -- just did something seen only one other time since 1871. And it's not good news for Wall Street.
Source
Originally published at www.fool.com.