Should we worry about the Shiller PE Ratio?

Shiller PE ratio

The rise in global equity prices in recent years has led to continued concerns over valuation levels. One indicator that appears to cause endless nervousness is the so-called “Shiller” PE ratio, which considers US stock prices relative to the rolling 10-year average level of earnings. As this note demonstrates, however, the Shiller PE ratio has proven to be a poor short-run market timing tool. And while it has proven to be a reasonable guide for likely longer-run returns in the past, allowance today needs to be made for the large structural decline in interest rates.

Market Insights: UK likely to dodge the Brexit bullet, for now at least


The impending United Kingdom referendum on European Union membership remains a major “event risk” for global markets over the coming month. That said, polling suggests the chances of the UK leaving the Union after this vote are diminishing, which means there might be scope for at least a short-term “relief rally” for the British Pound. More broadly, however, it’s worth noting that UK equities have underperformed their continental counterparts in recent years, and lingering concerns over the UK’s commitment to the European Union suggests investors might consider European investments that exclude the United Kingdom.

Market Insights: Negative rates positive for Gold


The recent rebound in the price of gold in light of heightened financial market volatility should serve as a reminder to investors of the “safe haven” properties that this precious metal can offer. What’s more, should more central banks resort to negative interest rate policy (NIRP) in the face of slowing global growth, gold’s safe haven status could take on added lustre.