Janet Yellen made headlines last week with her comment that stock market valuations “generally are quite high.” The market took note, driving down prices.
Is she right? Are stocks overvalued?
It certainly feels that way to most investors. Stocks are trading at all-time highs and are in the midst of a bull market that has seen the S&P 500 move up more than 200% since mid-2009 lows.
However, investing based upon feelings isn’t usually a very good idea. That’s why we rely so much on statistical models to help us be objective about where market valuations stand at any given point in time. Let’s see what we can uncover.