30 Apr 2019
Market Metrics: Equity Markets CAPE
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
CAPE stands for Cycle Adjusted Price to Earnings Ratio and is one of the measures used to compare today’s price relative to the average earnings across the cycle in today’s dollars.
It has been used and popularised by Yale University Professor Robert Shiller.
The CAPE10 is a 10 year average which helps to smooth out the highs and lows of booms and busts.
Interestingly the charts continue to show the same message which is that the Australian equity market and the US equity market are both still above their respective long term averages.
Click for charts.
Irrespective of this indicator, the key for investors is to remain invested according to your appetite for volatility (risk profile) and when fear and panic take hold during the next financial catastrophe, to then take advantage by buying more quality assets at discounted prices.
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