This Is the Most Expensive Market in Decades. Is It Really Safe to Invest Right Now?
There's no rule that says expensive valuations must end in big drawdowns.
Overview
It doesn't feel good to invest money when the assets you're buying seem to be priced for perfection. The Shiller price-to-earnings (P/E) ratio, which values stocks baaed on 10 years' worth of inflation-adjusted profits, was at 42 on Sept. 2 -- nauseatingly close to its late-1999 record high of 44. By October 2002, the Nasdaq had fallen by 77%. And now, the Buffett indicator -- which expresses total stock market capitalization as a percentage of gross domestic product -- is at a record high of 234%.
At times like this, even buying something heavily diversified, like the SPDR S&P 500 ETF Trust (NYSEMKT: SPY), can seem risky. But investors looking at entering the market with a sense of dread are making a lot of assumptions that might not be true, so let's take a closer look and see if buying stocks right now is likely to be a winning move or not.
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Originally published at www.fool.com.