The cyclically adjusted price earnings (CAPE) ratio is often used to express the valuation of an equity market. This lecture focuses on the CAPE of the U.S. equity market and finds it was very high in June 2018. Although a high CAPE has tended to suggest lower returns in the future, such forecasts only make sense for longer periods. CAPE has not been a reliable forecasting tool for short-term movements of the market and thus it is difficult to use as a market-timing indicator. Similar results were found for other developed countries.

Wim Antoons is Head of Asset Management at Bank Nagelmackers in Brussels and a member of the Brandes Institute Advisory Board. At Nagelmackers, he oversees the investment process for the private banking and fund of funds business. He established the firm’s value investment philosophy and its open architecture fund platform. He is also co-manager of the Nagelmackers Funds and manager of the Nagelmackers Privilege Fund.