The S&P500 P/E Ratio shows whether the stock market is overvalued or undervalued. It’s not a matter which Stocks you own in your portfolio because when the P/E Ratio turns EXTREME, VIRTUALLY ALL STOCKS Crash.
The price-earnings ratio is calculated by dividing a company’s stock price by its earnings per share. In other words, the S&P500 P/E ratio shows what the market is willing to pay for a stock based on its current earnings.
Yale professor Robert Shiller, the author of Irrational Exuberance, has reintroduced this adjusted ratio to a wider audience of investors. The P/E Ratio is illustrated below and is extremely simple to understand with a quick view of the chart.
So, is it under or overvalued?
Today the P/E Ratio is sitting at 28 and is in Extreme Bubble Territory and getting higher!
All you have to understand from the chart is that since 1880,
“Every single time the S&P500 P/E Ratio rose above 20, the stock market crashed; Every Single Time!”
You know what to expect, right?
Tomorrow we will show you an entirely different chart that will simply stun you.