Real S&P 500 with P/E Valuation - Monthly
Chart Description
This chart uses a simple, current price-to-earnings ratio as shown in Real S&P 500 P/E - Monthly to apply colored valuation indicators to the real (inflation adjusted) S&P 500 index as shown in Real S&P 500 - Monthly. Times in which the P/E is more than a standard deviation above/below its average are considered over/undervalued, and times in which the P/E is more than two standard deviations above/below its average are considered extremely over/undervalued. The purpose of this chart is to show that a simple, current price-to-earnings ratio is not a good stock market valuation measure because it doesn't do a good job of marking the major stock market peaks/valleys as over/undervalued.
Relevant Links
mccormick-charts.com: Real S&P 500 P/E - Monthly, Real S&P 500 - Monthly
Wikipedia: price-earnings ratio
