Yes, stock market prices have fallen far. But when we look at prices in terms of yields and price/earnings ration then no, they haven't fallen all that far as compared to previous historic lows:
And valuations were much more depressed at the bottom of the 1974 market than they are today. Back then, the Dow yielded 6.1 per cent and traded on a price-earnings ratio of 6.2; now the Dow yields just 2.4 per cent and the S&P 500 trades on an historic p/e of 31, according to Datastream.
This strikes me as an indication of just how loony the prices were at their peak.
|Share |||By Randall Parker at 2002 October 10 05:53 PM Economics Political|