Perspective On The Stock Market

As the below chart shows, the stock market, as measured by the Dow, was only about twice as high in value at its low (777) in 1982 compared to its high in 1929. After having only doubled in 53 years it has increased more than twentyfold since, to about 16300 today.

(A larger version of this chart can be found here) That is despite the fact that nominal national income increased much more in the 1929-1982 period (about thirtyfold from $94 billion to $2,840 billion) than in the 1982-2013 period (only somewhat more than fivefold, to $14,600 billion). This no doubt largely reflects that the stock market went from being highly overvalued in 1929 to highly undervalued in 1982. But at least to some extent it also implies that the stock market is overvalued right now.