Market Valuation Update – October 7, 2010

I have updated the market valuation data based on closing prices for October 6, 2010. The S&P 500 has advanced approximately 10% since September 1, 2010, when I last updated the indicators. Equities still appear attractive on a relative basis given the historically low yield on government and corporate bonds.

Buffett recently commented at the Fortune Most Powerful Women Summit that, “It’s quite clear that stocks are cheaper than bonds. I can’t imagine anybody having bonds in their portfolio when they can own equities, a diversified group of equities. But people do because they, the lack of confidence. But that’s what makes for the attractive prices. If they had their confidence back, they wouldn’t be selling at these prices. And believe me, it will come back over time.”

Generally speaking, from month to month relatively little changes in these indicators. The trick is to develop the discipline to follow them on a regular basis. Doing so, along with developing a rational investing framework, should improve your odds of being greedy when others are fearful and fearful when others are greedy.

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3 thoughts on “Market Valuation Update – October 7, 2010

  1. kungfu panda

    love the Market Valuation section….

    a little surprised to find out the S&P is trading about 20x trailing 12 months earnings…shanghai index is trading at a multiple of 15 where many big banks are trading at single digit multiple….

    Reply
  2. Greg Speicher Post author

    kungfu panda, that is based on average earnings over the past five years. Based on current trailing earnings, it closer to 17.3X.

    Reply

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