Have the record number of investors in the stock market lost their minds?

Re:Have the record number of investors in the stock market l... by hhw on Saturday May 16, 2020 @08:19AM (#23202798)

Historical rate of return on stocks is about 7%. So in theory, a stock trading at a price to earnings ratio of 14 or less is good value, whereas a stock trading at 15 times earnings is not so much.

However, other factors could play a part, as certain industries are favoured over others, risk, projecting earnings growth, etc.

As such, you can make the argument that stocks are overvalued because they're trading at all time or near all time highs in terms of price to earnings ratios and other metrics. And especially so now given that projected future earnings will have dropped considerably while stock valuations have not.

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Re:Have the record number of investors in the stock market l... by RivieraKid on Saturday May 16, 2020 @01:26PM (#23205368)

> Historical rate of return on stocks is about 7%. So in theory, a stock trading at a price to earnings ratio of 14 or less is good value

Why? I'm not saying it's incorrect but I've never seen such an approach to valuation.

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Re:Have the record number of investors in the stock market l... by MiroF on Saturday May 16, 2020 @06:34PM (#23207753)

> And especially so now given that projected future earnings will have dropped considerably while stock valuations have not.

Really that depends on your time horizon. The Fed has signaled that it is willing to act aggressively to boost AD, so that seems to me to be a signal that projected future earnings will not be that low.

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Re:Have the record number of investors in the stock market l... by adrianhel on Saturday May 16, 2020 @03:18PM (#23206372)

For 7% a P/E of 14.285714285 or less would be good to be very precise.

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