Anyone else worried about the Shiller P/E on the S&P 500 going up since 2009… is it just me?

General
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Hello everyone,

I’m posting this here because I’ve noticed discussions here tend to be more insightful than on other forums.

I’ve been keeping an eye on the Shiller P/E ratio of the S&P 500, and it’s been climbing steadily since 2009. It seems like every year, it just keeps getting more expensive without a real correction.

Is this just a result of more people investing in ETFs, or is there something bigger going on? It feels like finding companies that are fairly valued is getting harder and harder, which makes me wonder about future returns.

Do you all think the rising Shiller P/E is a concern, or am I overthinking it?

Thanks!

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There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

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Laken said:
There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

Yep, it’s not that stocks are pricey… it’s that money is just cheap.

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@Galen
What do you mean by ‘cheap’? What are you comparing it to?

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Marlon said:
@Galen
What do you mean by ‘cheap’? What are you comparing it to?

Basically everything else… when prices go up, it means money loses value too. It goes both ways.

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Marlon said:
@Galen
What do you mean by ‘cheap’? What are you comparing it to?

I think we’re just seeing the effects of money being pumped into the economy, which drives prices up everywhere, not just in stocks.

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@Remi
Sorry, your comment got flagged for using certain language not allowed here. Try rephrasing if you want it to stay up.

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Laken said:
There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

Even folks with modest incomes have cash now… it’s kind of wild. I have more than I expected, and I can only imagine what the truly wealthy have.

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@Eli
Yeah, I keep seeing people online talking about being broke, but business is booming in a lot of sectors!

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Laken said:
There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

I think we’re at the point where comparing current valuations to historical ones doesn’t mean much. So much has changed with low-interest rates and Fed interventions.

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Laken said:
There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

This is spot on.

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Laken said:
There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

Cheap money affects both the numerator and denominator in P/E ratios.

To me, it’s more about changing investor priorities and how the market’s shifted to growth-oriented tech companies, which have always had higher P/E ratios.

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Laken said:
There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

How should we adjust for the expanded money supply in these valuations?

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@Finley
One way is to use a ratio like P/E that has money factored in on both sides.

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Dallas said:
@Finley
One way is to use a ratio like P/E that has money factored in on both sides.

But isn’t one side based on past money and the other on future expectations? They’re not exactly the same.

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@Terry
Looking at trends since ’09, there’s not much difference in timing between them.

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Laken said:
There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

Cheap money floating around… Lower taxes… More share buybacks… all of it pushes prices up.

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Laken said:
There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

Why have things gone differently for linkers in the past few years? Don’t they offer some counterbalance?

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Laken said:
There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

This time is different… or so they say.

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Laken said:
There’s so much cash out there that I don’t think we’ll see reasonable valuations again. M2 supply is through the roof, and all this cash is just pushing everything up.

What exactly is M2?