With relatively little fanfare, the stock market has become expensive again.
While the rest of economy has been growing frustratingly slowly for almost five years, stocks have been rising at a boomlike clip. An investment in the Standard & Poor 500-stock index would have doubled from early 2009 through early 2013 and then gained an additional 18 percent over the last year.
Relative to long-term corporate earnings â€“ and more in a minute on why that measure is important â€“ stocks have been more expensive only three times over the past century than they are today, according to data from Robert Shiller, a Nobel laureate in economics. Those other three periods are not exactly reassuring, either: the 1920s, the late 1990s and in the prelude to the 2007 financial crisis.
Wall Street, of course, can always come up with justifications for high stock prices. Remember: The Internet changes everything. Or: The business cycle has been repealed. Some of the current justifications even have a ring of reality to them.