Market Remains Overvalued - Wednesday, April 4

Here is a summary of the four market valuation indicators we update on a monthly basis.

The Crestmont Research P/E Ratio (more)

The cyclical P/E ratio using the trailing 10-year earnings as the divisor (more)

The Q Ratio, which is the total price of the market divided by its replacement cost (more)

more)

The chart below differs from the one above in that the two valuation ratios (P/E and Q) are adjusted to their geometric mean rather than their arithmetic mean (which is what most people think of as the “average”). The geometric mean increases our attention to outliers. In our view, the first chart does a satisfactory job of illustrating these four approaches to market valuation, but we've included the geometric variant as an interesting alternative view for the two P/Es and Q. In this chart, the range of overvaluation would be in the range of 77% to 145%, down from last month's 79% to 147%.