Stock Market Valuation July 4th 2011

The market increased slightly over the past 30 days (including the close on July 1st), however, some valuations went up while others went down.

The current level of the S&P500 is 1340, and the Dow is at 12,583– slight lower than last month. As evidenced below, market valuations did not change much over the last month. I update market valuations on a monthly basis. The point of this article is to measure the stock market based on seven different metrics. This article does not look at the macro picture and try to predict where the economy is headed. It only uses these several metrics which have been very good past indicators of whether the market is fairly valued.


To Recap

1. P/E (TTM) – Fairly Valued 15.0

2. P/E 10 year – Extremely overvalued 23.67

3. P/BV – xtremely overvalued – 3.68 (using numbers discussed above from April)

4. Dividend Yield – Indeterminate/ overvalued 1.72

5. Market value relative to GDP – Moderately Overvalued 97.1

6. Tobins Q – Extremely overvalued 1.19

7. AAII Sentiment – Average

8. GMO – Overvalued