Although this study mainly centered on DM based assets (deutche mark) ... it did include analysis of the US market.
Summarized: Bonds are at a historical high 'overvalue' level - with yields the lowest in history.
Equities: Maybe overvalued. Using the P/E method, we are at just pre-1929 Market overvalue levels. HOWEVER; equities have actual assets backing up their valuations (unlike bonds), and inflation could (legitimately/illegitimately depending on ones reasoning) drive equity values much higher.
There is ONE point that the analysis briefly touches on - but fails to elucidate properly. Read the article first - then the mt 'missing piece'.
http://www.zerohedge.com/news/2017-09-18/deutsche-bank-global-asset-prices-are-most-elevated-history
...It's easier to be black and white in terms of bonds long-term value. In short there isn’t any relative to history. For equities it’s more difficult to assess partly because they are a real asset and therefore today could be a good time to buy if one felt that despite relatively high valuations, inflation may permanently increase (or better still real GDP growth) and thus lead to eventually permanently higher earnings notwithstanding any short-term negative implications of the inflationary transition. However our technique looks at valuations relative to what we know now and where we are relative to history.
For equities, current valuations are certainly stretched relative to nominal GDP through history. We have been more expensive but we are approaching the peaks of 2000 and 2007 and are in line with the most stretched valuations from the 1930s on this metric and higher than the 1929 crash point.
Given how weak nominal and real GDP has been post GFC (Figure 60), and how much of a downward trend both have been for several decades now, this shouldn’t be a surprise.
,,, article continues - I think this is a solid and balanced analysis using a legit line of reasoning.
OK: mtnote: Profits, which effect the P/E earnings, are low wrt to current price. MONETARY INFLATION has been RAMPANT GLOBALLY for the past few decades - everybody (and their dogs) have their printing presses in overdrive. PRICE INFLATION has LAGGED far behind monetary inflation, in part due to massive manipulations (eg. zero/negative interest rates) by Central Banks.
PRICE INFLATION (consumer prices) is about to EXPLODE. In other words, profits have been depressed (in nominal dollars), but equities have reflected real dollar values (ie. devalued dollars == means higher nominal dollar prices). When the CPI explodes globally - the P/E ratios will 'magically' improve ... and make equities seem to be a much better place to invest than it currently appears to be.
Finally, brethren, whatsoever things are true, whatsoever things are honest, whatsoever things are just, whatsoever things are pure, whatsoever things are lovely, whatsoever things are of good ...
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