VTI - SPY: Rating Downgrade Due To Overvaluation

2024-06-19 12:07:07 ET

Summary

• SPY is very expensive by usual valuation metrics such as P/E, dividend yield, and PEG ratio.
• Yet, the truly alarming sign comes when its valuation is benchmarked by risk-free rates.
• With the excess CAPE Yield (“ECY”) hovering at a historical low (only about 1.2% currently), history suggests extremely unfavorable excess return potential over treasury bonds.

SPY ETF has become very expensive

My goals for this article are twofold. First, I want to examine how expensive the market has become, as represented by the SPDR S&P 500 Trust ETF ( SPY ). I will examine the valuation beyond the high P/E or low yield often discussed and explain why the current valuation is so concerning and led to my decision to trim my exposure. Second, I want to discuss the alternative ideas and what I did with the proceeds....

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