P/E ratio, or, more likely, CAPE. P/E stands for "price to earnings" - it essentially tells you how much you're paying in a share of stock for each dollar in fu

P/E ratio, or, more likely, CAPE. P/E stands for "price to earnings" - it essentially tells you how much you're paying in a share of stock for each dollar in future earnings. P/E is calculated at a point in time - current price over last reported earnings. The CAPE (Cyclically adjusted price-to-earnings) ratio is a better measure because it's calculated based on the last 10-years earnings. It's somewhat predictive of future stock market returns (10 to 17 years out), albeit with wide variation. Right now the American stock market is very expensive. Take a look at http://www.multpl.com/shiller-pe/ http://www.multpl.com/shiller-pe/. Many international markets are not, though: http://www.starcapital.de/research/stockmarketvaluation http://www.starcapital.de/research/stockmarketvaluation. Current American market valuations have most people expecting very little real (inflation-adjusted) returns from the stock market over the next 10 years.