Four Ways Of Valuing The Market
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Relates earnings yield on stocks to interest rates. When the earnings yield is equal to the current yield on a 10-year U.S. Treasury bond, stocks are at fair value. If the earnings yield is above the interest rate, stocks are a buy; below, stocks are overvalued.
Looks at price-earnings ratios over time to determine a long-term market average. When the current p-e exceeds that average, as it does now, the market is overvalued.