How Shiller is signaling 'significant upside' for S&P

On August 19, Shiller told CNBC that his CAPE ratio stood at 25, a level that has been surpassed only three times since 1881 - the years surrounding 1929, 1999 and 2008. The ratio averaged 15.21 in the 20th century and stood at 23 last year. He warned on the valuation of U.S. stocks, bonds and housing and sent ripples through global markets. 

"You should be very, very careful in being tactical," he told CNBC Friday, but added that he was convinced that markets will see significantly higher equity prices over the next three to five years. 

Despite questions surrounding the calculations, Shiller could hardly be described as a contrarian. A growing chorus of naysayers has warned of a potential correction - or something even worse - in the S&P 500. Societe Generale's uber-bearish strategist Albert Edwards said on Thursday that a bubble in stock markets is on the verge of bursting with the S&P 500 now "running on fumes." Meanwhile, David Tice, president of Tice Capital and founder of the Prudent Bear Fund, told CNBC on Wednesday that markets could soon face a fall of up to 60 percent with the most likely cause being disillusionment with the Federal Reserve 's policy guidance.

DYI