[00:02] the internet and the data is absolutely terrifying. Now, this is a scatter plot. >> Scatter plot. What this chart shows is the correlation between the price you pay for the S&P 500 and the expected average returns you're likely to get
[00:16] over the next 10 years. And it just so turns out that if things are more expensive, your returns have a negative correlation, meaning the more expensive the S&P 500 is or the higher the PE
[00:29] ratio, the more likely you are to lose over a 10-year span, which makes a lot of sense. But this is when things start to get a little bit eye-opening. If you look closely at the chart, the moment the PE ratio gets to 23, there were no
[00:43] exceptions, your annualized return over the next 10 years was always negative, meaning you're basically buying the top. And what's the current PE ratio of the S&P 500? 29. Does this mean that the stock market is going to crash tomorrow?
[00:58] Does this mean it's time to sell? No, we still have plenty of room to go up, but what it does show us is that currently stocks are expensive and with that information, you should be positioning accordingly.