Fears of a domestic slowdown and the escalation of the U.S.-China trade war created plenty of headaches for shareholders this summer. But even after dramatic market swoons in May and August, investors still seem willing to pay top dollar for stocks—especially those that promise substantial growth.
As measured by the Shiller price-to-earnings ratio, which compares companies’ share prices to the 10-year, inflation-adjusted average of their profits, the S&P 500 sat at just above 29 in mid-August. That’s higher than at nearly any other time on record, with the exceptions of the run-up in 1929 and the 2000 dotcom boom. (Neither one of those surges ended well, as you may recall.)
