US CAPE and q chart

US CAPE and q chart for Q1 2018.

With the publication of the Z1 data up to 31st March, 2018 (7th June, 2018), I have updated my calculations for q and CAPE.

Both q and CAPE include data for the quarter to 31st March, 2018. In March, the S&P 500 was at 2702.77 and US non-financials were overvalued by 85% according to q and quoted shares, including financials, were overvalued by 123% according to CAPE. (It should be noted that I use geometric rather than arithmetic means in these calculations.)

As at 8th June, 2018, with the S&P 500 at 2779.03, the overvaluations by the relevant measures were 90% for non-financials and 130% for quoted shares.

The chart shows the overvaluations at year ends, plus that for March 2018. In the Table below I show the overvaluations at the levels of the stock market at their peak month ends compared with those on 8th June 2018.

[Please click this link for a copy of the "Q1 2018 comment sheet" that contains the table]

Data for my calculations of q are taken for 1900 to 1952 from Measures of Stock Market Value and Returns for the Non-financial Corporate Sector 1900 – 2002 by Stephen Wright, published in the Review of Income and Wealth (2004) and for 1945 to 2018 from the Financial Accounts of the United States (“Z1”) published by the Federal Reserve. Data for our calculations of CAPE are taken from the data published on Robert Shiller’s website, updated from data published by Standard & Poor’s.

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