The S&P 500 is Undervalued by 15%

Brock Value Latest Ten Years

US GDP (Est) Corp Bond Yield S&P 500 Brock Value Undervaluation
$21.743t 3.00% 3066.91 3623.94 15.4%
These are the latest numbers, updated to November 1. With US GDP at an estimated $21.743 trillion and medium-term corporate bonds yielding 3.00%, the intrinsic value of the S&P 500 index as measured by Brock Value is 3623.94.
By comparison, the S&P closed at 3066.91 on November 1, 15.4% below Brock Value. Click the chart to enlarge.

Understanding Brock Value charts

Brock Value is the first clear answer to the question: what is the market worth? BV is a valuation metric with just two inputs: GDP and interest rates. Compared to questionable old-school metrics (and even popular ones like Shiller’s CAPE), BV provides reliable measurements, especially at critical turning points.
brock value 1960 to present

The red and green lines fence in the normal range of the market, 30% higher and 20% lower than BV, the white line, respectively. Click chart to enlarge.
Valuation Return
Above Red Line 1.0%
Fair Value 6.3%
Below Green Line 11.0%
Median 10-year compound annual real total returns, 1919-2008

The red and green lines found on most of the Brock Value charts on this site indicate the normal range of the market. The red line indicates 30% overvaluation, while the green line represents 20% undervaluation. These guidelines serve as boundaries, beyond which valuation is extreme in one direction or the other. When the market (the yellow line) trades above the red line, it is highly overvalued. When this happens, my analysis shows that prospective (ten-year) returns tend to be lower than average. Conversely, when the market trades below the green line, it is undervalued and ten-year returns will most likely be higher than average.