The Stock Market Just Did Something for the 2nd Time in 145 Years, and History Says What Comes Next
These gauges have real flaws worth knowing about, but neither one is easy to wave away.
Overview
The S&P 500 (SNPINDEX: ^GSPC) has been on quite a ride recently. After gaining more than 6% in the first two weeks of August, it's now 2% off its Aug. 13 high. The Nasdaq Composite's performance over the same period has been even more up-and-down (hardly a surprise for the tech-heavy index) -- up nearly 10%, then down nearly 3%.
Something else happened during those weeks that's definitely worth paying attention to: The Shiller CAPE ratio, the most widely followed measure of how expensive the stock market is, crossed above 41. In 145 years of data, it's been above 41 exactly twice -- right now, and at the peak of the dot-com bubble in late 1999.
Details
So what should an investor do?
Source
Originally published at www.fool.com.