Rafferty Capital Markets applies Robert Shiller’s CAPE methodology to large U.S. bank stocks, arguing the sector looks cheaper than the broader market While the S&P 500 traded near 26 times cyclically adjusted earnings in 2014, large banks sat near decade average valuations despite earnings expectations.
Applying the Schiller Methodology to Bank Stocks
Rafferty Capital Markets
Richard Bove
Research
3 Pages
Key Takeaways
Banks Not Overextended: The SNL Large Cap Bank Index traded near its 10 year average CAPE ratio, despite the four largest banks representing 66.2% of index value.
Market Valuation Gap: The S&P 500 reached 26 times inflation adjusted earnings in 2014, the third highest reading across roughly 135 years of market history.
Earnings Support Valuations: CAPE readings for large banks began in 2004, and projected earnings growth suggested valuations could improve further rather than signal speculative excess.
Join our newsletter to have all of this content + Exclusive Newsletter Bonus Content delivered to your inbox every week
