Think stocks are overpriced? Think again.

Think stocks are overpriced? Think again.

By Paul Price

Forward P-E Ratios v. Interest Rates    Sep 1978 - Apr. 2013

High interest rates justified extremely low P/Es in the late 1970’s – early 1980’s. When investors could get as high as 15%  – 18% on insured bank CDs, they had little appetite for stock market risk.

Today, with near-zero interest (ZIRP) available on CDs, bonds and money markets, P/E multiples should be greater than average.

Instead the forward multiple is barely above the long-term average.  Relative to fixed income, stocks are still cheap.

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Comments

  1. Robert Rusconi says:

    Stocks may or may not be overpriced but one thing is for certain:
    Money is under-priced because of the corrupt central banking systems that are adding liquidity to swamps.

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