Extreme Valuations and Future Returns of the S&P 500
16 Pages Posted: 15 Jan 2021
Date Written: November 1, 2020
Higher than average Price-to-Earnings (P/E) ratios and Cyclically-Adjusted Price-to-Earnings (CAPE) ratios have been tolerated by investors recently on the basis of low interest and inflation rates. This white paper analyzes what level of returns can reasonably be expected going forward from today’s elevated valuation multiples.
Keywords: Valuation, Price-to-Earnings, P/E, CAPE, Inflation, Interest Rates, Extreme Valuation, Low Interest Rates, Regression Analysis, S&P 500, Expected Returns
JEL Classification: E31, C51, B41, G11, G12, G00, G01
Suggested Citation: Suggested Citation