But of we look at the last 40 years or so, the CAPE has been higher, suggesting that we don’t know how what “normal” looks like going forward.
As you listed, crashes lead to sub 20 PEs. Mag7 PEs is not representative of Russel 2000 PEs. High PEs expect high growth for long period. Reality checks usually happen, but PE’s are not universally high. Just with the oligarchs with White House guest passes.
The 2000 crash didn’t though, it was just over 20 at the trough. Jan 2003 was 21. That was almost as high as the peak in the 60s, and higher than the moment before Black Monday. So the market reverted to a mean that would be considered a peak just 20-30 years prior. 15 used to be a good marker for “average,” and now that’s the marker for the Great Recession.
Crashes used to lead to sub-10s, and now they crash to 15-20. The market has fundamentally changed with 401ks and IRAs.
As you listed, crashes lead to sub 20 PEs. Mag7 PEs is not representative of Russel 2000 PEs. High PEs expect high growth for long period. Reality checks usually happen, but PE’s are not universally high. Just with the oligarchs with White House guest passes.
The 2000 crash didn’t though, it was just over 20 at the trough. Jan 2003 was 21. That was almost as high as the peak in the 60s, and higher than the moment before Black Monday. So the market reverted to a mean that would be considered a peak just 20-30 years prior. 15 used to be a good marker for “average,” and now that’s the marker for the Great Recession.
Crashes used to lead to sub-10s, and now they crash to 15-20. The market has fundamentally changed with 401ks and IRAs.