As usual before we look at the CAPE let us first look at other key S&P 500 metrics:
- The S&P 500 Price is currently 1,461 which is a rise of 2.7% on last month’s Price of 1,422 and 12.3% above this time last year’s monthly Price of 1,301.
- The S&P 500 Dividend Yield is currently 2.1%.
- The S&P As Reported Earnings (using a combination of actual and estimated earnings) are currently $87.55 for an Earnings Yield of 6.0%.
- The S&P 500 P/E Ratio is currently 16.7 which is up from last month’s 16.3.
The first chart below provides a historic view of the Real (inflation adjusted) S&P 500 Price and the S&P 500 P/E. The second chart below provides a historic view of the Real (after inflation) Earnings and Real (after inflation) Dividends for the S&P 500.
Click to enlarge
Click to enlarge
As always let us now turn our attention to the metric that this post is interested in which is the Shiller PE10. This is also shown in the first chart which dates back to 1881 and is effectively an S&P 500 cyclically adjusted PE or CAPE for short. This method is used and was made famous by Professor Robert Shiller. It is simply the ratio of Real (ie after inflation) S&P 500 Monthly Prices to 10 Year Real (ie after inflation) Average Earnings.
It is important to highlight that my calculation method varies from that of Professor Shiller. He only uses S&P 500 Actual Earnings data where because I use the S&P 500 PE10 to actually make investment decisions from I also include extrapolated Earnings estimates right up to the present day. This is to try and make the value as current as possible.