Technically, followers of CAPE would say stocks should almost always be bought except when the CAPE ratio is very high like now. While that’s a fair point, the fact that the Shiller PE has been higher than its historical median for most of the past few decades seems to suggest there have been changing market dynamics which make it less relevant.
The biggest assumption CAPE makes is that margins will fall. There’s debate whether this is cyclical action or mean reversion. Either way, the current record margins are projected to decline. Investors fear when anyone says ‘this time is different’, but it’s fair to question if the high margins the tech sector has produced must fall just because margins in other industries did so in the past.
Submitted September 04, 2018 at 10:14PM by AlexPitti https://ift.tt/2Q6CfW6
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