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 1,360 which is a fall of 5.4% on last month’s Price of 1,438 and 10.9% above this time last year’s Price of 1,226.
- The S&P 500 Dividend Yield is currently 2.2%.
- The S&P As Reported Earnings (using a combination of actual and estimated earnings) are currently $88.20 for an Earnings Yield of 6.5%.
- The S&P 500 P/E Ratio is currently 15.4 which is down from last month’s 16.4.

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 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*

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.

The key S&P 500 PE10 metrics are:

- The S&P 500 PE 10 is currently 20.3 which is 6.0% below last month’s 21.6.
- The correlation between the Nominal S&P500 Price and the S&P 500 PE10 from present day back to 1881 is 0.67. This correlation is one reason why I use this metric to make investment decisions from.
- The Dataset Average S&P 500 PE10 which dates back to 1881 is 16.5. Assuming this is “fair value” and even after the 5.4% Price fall this month it indicates that the S&P500 is still some 23% overvalued.
- The Dataset Median S&P PE10 is 15.9.
- The Dataset 20th Percentile S&P 500 PE10 is 11.1.
- The Dataset 80th Percentile S&P 500 PE10 is 20.9.

*Click to enlarge*

So what of my Retirement Investing Today Portfolio. Regular readers will know that I use the above PE10 data to set my allocation to the International Equities portion of my portfolio. This is strategically set at 15% of total assets and is targeted to consist of 40% US Equities, 40% Europe Equities and 20% Japan Equities. I then add the S&P500 PE10 tactical spin on top of this with a target of 10.5% allocation should the PE10 climb to 26.5 (Average PE10+10) or 19.5% should the PE10 fall to 6.5 (Average PE10-10). Therefore today my tactical allocation sets itself below 15% at 13.3%.

As always do your own research.

Assumptions include:

- S&P500 Prices are month averages except November ‘12 which is the 16 November ’12 S&P 500 market close Price.
- October and November ‘12 Dividend is assumed to be equal to the September ’12 Dividend
- July ’12 to November ’12 reported earnings are estimates from Standard & Poor’s.
- Inflation data from the Bureau of Labor Statistics. November ‘12 inflation is extrapolated.
- Historic data provided from Professor Shiller website.

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