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Crestmont Market Valuation Update

  • Written by Syndicated Publisher No Comments Comments
    September 9, 2014

    Based on the August S&P 500 average of daily closes, the Crestmont P/E is now 90% above its arithmetic mean and at the 98th percentile of this fourteen-decade monthly metric.


    The 2011 article P/E: Future On The Horizon by Advisor Perspectives contributor Ed Easterling provided an overview of Ed’s method for determining where the market is headed. His analysis was quite compelling. Accordingly I include the Crestmont Research data to my monthly market valuation updates.

    The first chart is the Crestmont equivalent of the Cyclical P/E10 ratio chart I’ve been sharing on a monthly basis for the past few years.

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    Click for a larger image

    The Crestmont P/E of 26.3 is 90% above its average (arithmetic mean) of 13.9. This valuation level is similar to the 85% we see in the latest S&P Composite regression to trend update and higher than the 54% above mean for the Cyclical P/E10 (more here).

    The latest Crestmont P/E puts the current valuation at the 98th percentile of this fourteen-decade series.

    Click to View
    Click for a larger image

    For a better understanding of these charts, please see Ed’s two-part commentary here:

    And these articles explore key concepts for investment expectations and planning.

    Also, here links to the latest updates on Ed’s Crestmont Research website.


    Ed Easterling is the author of Probable Outcomes: Secular Stock Market Insights and award-winning Unexpected Returns: Understanding Secular Stock Market Cycles. He is President of an investment management and research firm, and a Senior Fellow with the Alternative Investment Center at SMU’s Cox School of Business, where he previously served on the adjunct faculty and taught the course on alternative investments and hedge funds for MBA students. Mr. Easterling publishes provocative research and graphical analyses on the financial markets at www.CrestmontResearch.com.

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.
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