Bullish expectations for earnings growth, if correct, could act as a counterweight to high valuation and keep the equity market humming, but high valuations for stocks is still a risk factor.
Dan M, the standard CAPE ratio uses inflation adjusted S&P 500 earnings. The Excess Cape Yield (ECY) goes a step further and adjusts the standard CAPE with the real 10-year Treasury yield. As such, ECY estimates the excess return of stocks to bonds in inflation-adjusted terms.
Maybe I am mis-reading the analysis, but I thought Shiller's CAPE was already real, i.e., adjusted for inflation.
Dan M, the standard CAPE ratio uses inflation adjusted S&P 500 earnings. The Excess Cape Yield (ECY) goes a step further and adjusts the standard CAPE with the real 10-year Treasury yield. As such, ECY estimates the excess return of stocks to bonds in inflation-adjusted terms.