There’s a very interesting article at Alpha Architect that dives into three different methods of determining stock values, the Fed model, the Shiller model, and the Graham model.
So, is the market overvalued, undervalued, or overvalued and undervalued? Beats me. IMO it’s a pond that guys like me shouldn’t play in.
It beats them, too.
Schiller is dependent on some “right” level of value as if it was a physical law, and discards the potential for changes. The Fed model ignores artificial tinkering with interest rates. Investors aren’t that stupid.
At least Graham incorporates fundamentals, and human nature, by observing the emotion evidenced by overshoots.
If people had a foolproof model they wouldn’t be writing articles or conducting studies. They’d be buying and selling S&P futures. Only Hillary has that ability……..