The Stock Market Is Flashing a Warning Sign, but History Has Good News for Long-Term Investors
Stocks may be historically expensive but that's not necessarily a sell signal.
Overview
Two of the market's best-known valuation indicators are sending the same clear message: Stocks are expensive right now.
The Buffett indicator, which measures the total value of U.S. stocks against U.S. gross domestic product (GDP), is nearly 240%, the highest it's ever been. Keep in mind that in a past Forbes article, Warren Buffett said famously that investors were "playing with fire" when this ratio approached 200%.
Details
The Shiller CAPE ratio, which measures stock prices against inflation-adjusted earnings from the previous 10 years, currently clocks in at 41.5. The only time that figure has ever been higher was during the peak of the dot-com bubble.
Source
Originally published at www.fool.com.