I think that Dr. John Hussman's Price to
Peak Earnings approach is a good one.
Not exact matches
Also, as you
approach retirement, you're often at the
peak of your
earnings and your ability to build retirement savings.
Earnings are the most volatile of these, sometimes growing from trough - to -
peak at rates
approaching 20 % annually, and sometimes plunging from
peak - to - trough at rates
approaching -20 % annually.
For example, during the 10 years beginning in 1964 (when the price /
peak earnings ratio
approached 20 for the first time since 1929), the S&P 500 achieved a total return of close to zero, including dividends.
Of course, none of this is to say a bear market can't occur, but overall, a healthy
earnings environment has kept valuations from
approaching the levels that marked the
peak back in 2000.
Earnings are the most volatile of these, sometimes growing from trough - to -
peak at rates
approaching 20 % annually, and sometimes plunging from
peak - to - trough at rates
approaching -20 % annually.
Also, as you
approach retirement, you're often at the
peak of your
earnings and your ability to build retirement savings.