The Market is NOT overvalued

The best way to value the market is by the price change. Others use PE or Market Value to GDP.

Since 1926, the rolling 5-year average annual return has been as high as 26% per year for the five years ending in 1928. Another example was the 25% average annual return for the five year period ending in 1999.

On the low end, we see the five years ending in 1932 at -15%. More recently, the five years ending in 1974 gave us an annual loss of -3% per year.

Where do we stand now? The five years ending 2016 was a respectable 10.49% per year. But 10% per year is not a barn-burning rate. It is in the top third, but hardly in the stratospheric 26% per year ending 1928. 2017 has been a good year so far. In fact, the five years ending 2017 (if the market ended the year today) would be 12.48%.

We are far from being in a market that is moving up too fast. Don’t confuse the illusion we are making new records too fast. It is not the same thing as going from 1,000 to 2,000 on the Dow when you go from 22,000 to 23,000.

The five-year annual rate of return in in the middle of the pack.
The Dow Gold Ratio is still going up.
Long-term interest rates are still trending down

Stay long your index ETF positions. When this changes I will tell you. Until then, hold your ground. Remember the Dow Gold Ratio Strategy is really just market timing for buy and hold investors.