We Are Witnessing the Stock Market Do Something for Only the 3rd Time in 156 Years, and History Suggests This Will Come Next
Over the long haul, investing in the stock market is one of the best ways to build wealth, but it isn’t a get-rich-quick scheme. And periods of unusually high returns are often followed by sharp declines as market expectations and corporate valuations come back down to Earth.
This historic pattern is particularly relevant for investors right now. During the past four years, the benchmark S&P 500 (SNPINDEX: ^GSPC) has grown by a whopping 21% annually — more than double its 100-year average return of about 10%. Let’s dig deeper into what history suggests might happen next and discuss strategies investors can use to stay ahead.
In 1988, Nobel Prize-winning economist Robert Shiller introduced the cyclically adjusted price-to-earnings (CAPE) ratio. The metric compares the value of the S&P 500 to its 10-year average inflation-adjusted earnings to highlight periods of long-term overvaluation in the market.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.