"The Shiller price to earnings ratio was designed by Nobel Prize winning economist Robert Shiller to give investors a sense of whether stocks are cheap or expensive. It compares stock prices, as measured by the S&P 500 index, with inflation-adjusted corporate earnings over the past 10 years.
"The magic number at the moment is 25. That's the current Shiller ratio, and it indicates that stocks are on the expensive side. The long-term average, going back more than 130 years, is 16.5.
"But the current level is significant for another reason. According to research by Credit Suisse, when the ratio has been between 25 and 26 in the past, stock returns over the next five years have been just 2.7%. That's after adjusting for inflation."
http://money.cnn.com/2014/05/21/investing/stock-returns-low-...
"The Shiller price to earnings ratio was designed by Nobel Prize winning economist Robert Shiller to give investors a sense of whether stocks are cheap or expensive. It compares stock prices, as measured by the S&P 500 index, with inflation-adjusted corporate earnings over the past 10 years.
"The magic number at the moment is 25. That's the current Shiller ratio, and it indicates that stocks are on the expensive side. The long-term average, going back more than 130 years, is 16.5.
"But the current level is significant for another reason. According to research by Credit Suisse, when the ratio has been between 25 and 26 in the past, stock returns over the next five years have been just 2.7%. That's after adjusting for inflation."