Do Stock Market Valuations Matter?

For the rest of us, there is scant evidence future stock prices will make their next big move based upon historical valuations. There is no light http://answers.yahoo.com/question/index?qid=20131207102553AAXvB0j bulb in the stock market’s brain that suddenly triggers a rally because stocks are cheap. Likewise, that same light bulb in the stock market’s brain that suddenly triggers a selloff because stocks are expensive doesn’t exist. History, for those of us who still bother with it, shows us the stock market doesn’t necessarily need to be grossly overvalued before it can suffer a severe correction. Have we already forgotten what occurred in 2007? By historical standards, the U.S. stock market (NYSEARCA:VTI) in the fall of 2007 was a bargain compared to the stock market of 2000. But that still didn’t stop stocks from declining almost 50% over the next 18 months.
Full story: http://www.nasdaq.com/article/do-stock-market-valuations-matter-cm310172

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