“The stock market is more overvalued than at most of its other tops since 1900, as measured by six prominent valuation measures, says Mark Hulbert, publisher of Hulbert Financial Digest.
“That doesn’t mean the bull market is coming to an end, of course, since some past bull markets were even more overvalued when they topped out,” he writes in The Wall Street Journal.
“Nevertheless, the evidence suggests that risks are high. You may want to consider selling some of your stock holdings and building up cash.”
Hulbert looked at 35 bull market tops since 1900, as defined by Ned Davis Research.
When it comes to the price-earnings (P/E) ratio, based on the previous year’s earnings, the Standard & Poor’s ratio is now 18.6, exceeding 24 of the 35 prior tops.
Moreover, Robert Shiller’s cyclically adjusted P/E ratio, which uses 10 years of earnings, sits at 25.6, beating 29 of the 35 previous tops.
Meanwhile, the S&P 500’s dividend yield stands at 2 percent, lower than 30 of the 35 prior tops. A lower yield can mean higher stock prices.
The other three indicators are…”
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