Sunday, 12 December 2010
The FTSE 100 cyclically adjusted PE ratio (CAPE or PE10) – December 2010
My second chart shows Real Annual Earnings. In a month they have increased from 394.1 to 486.8 which is just about on the trend line of the chart. This to me seems like a massive increase which made me double check the Financial Times data from which I calculate these charts. This is a long way from the 302.2 of a year ago.
My final chart compares the PE10 position compared to the two other markets that I collect data for – the S&P 500 and the ASX 200. As detailed above we have the FTSE 100 PE10 at 13.9 compared with the S&P 500 PE10 at 21.7 (as of the 24 November 2010) and the ASX 200 at 18.0 (as of the 07 November 2010). This implies that if you were looking to buy the current best value equity index you might consider the FTSE 100.
Personally, I’m not buying any equities at this point in time. In fact I’m currently overweight in my International, Australian and UK equities however not far enough to justify a rebalance.
As always do your own research.
- December 2010 price is the 01 December 2010 market close.
- UK inflation data from November and December 2010 are estimated.