As we've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for many years. 

But they can play a role in framing longer-term expectations of investment returns. 

At present market overvaluation continues to suggest a cautious long-term outlook and guarded expectations. 

However, at today's low annualized inflation rate and the extremely poor return on fixed income investments (Treasuries, CDs, etc.) the appeal of equities, despite overvaluation risk, is not surprising.

DYI Comments:  The biggest surprise for these investors will be a 45% to 60% drop in stock prices.  At these levels those who are buying stocks at a high percentage allocation are actually speculating.

DYI's model portfolio remains as "The Great Wait Continues" for improved valuations.

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  12/1/15

Active Allocation Bands (excluding cash) 0% to 60%

78% - Cash -Short Term Bond Index - VBIRX

22% -Gold- Precious Metals & Mining - VGPMX

 0% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

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DYI