I know most Slopers lean towards the bear side, and for good reasons. Many of of the reasons I have had for leaning to the bearish side has been proven over time to be false in the near term which has cost me dearly. Longer term however, the truth is that no sustainable bull market ever began while the PE was over 20. It will simply be difficult for me to become a bull until the PE fell below 10. No sustainable bull market ever began without the PE dipping below 10.
What I have attempted to do below is to show what prices have done since the depression when the PE reaches extremes. The top chart is the S&P and the bottom chart is the PE chart. Obviously, when the PE’s are high it pays to invest in a much more guarded fashion while when the PE’s are low, it pays to become much more bullish.