|US GDP (Est)||Corp Bond Yield||S&P 500||Brock Value||Undervaluation|
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.
|Above Red Line||1.0%|
|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.