October 5, 2007
On October 5, 2007, the S+P 500 closed at 1557, according to Google Finance. There may have been intraday highs slightly higher than this but I think that we can more or less agree that 1557 was close to the 'generational high' of our last American bull market.
On May 22, 2013, the S+P closed at 1686 or thereabouts. That is 8.2% greater than the 2007 high that I mentioned. In other words, over roughly 5.5 years, the S+P posted an 8.2% gain, high-to-high. That works out to an annual percentage rate gain of about 1.8%, dividends excluded. (The math becomes complicated when you consider how dividends might be reinvested, so I've ignored them, but I imagine you'd get closer to an annual gain of 3.5% with them factored in.)
1.8% is actually fairly close to the annual GDP growth rate of the USA during that period. So I have just one question for the Fools who've been debating the wisdom of further QE:
On Oct 5, 2007, do you believe US equity stocks were fairly valued for future growth? Knowing what you know now, would you have been a net buyer of stocks on that date? Would you have wanted that date to be your entry point for stocks? Sit back and take a look at the chart, and historical S+P P/E ratios, before you answer, if you like.