The market is trading at 17.1 times the next 12-month earnings estimate, which is slightly above the average since 1999.
More worrisome is another well-known valuation method called the "cyclically adjusted price-to-earnings ratio" (CAPE). It is calculated using price divided by the index's average historical 10-year earnings, adjusted for inflation.
Yale economics professor Robert Shiller's research found future 10-year stock market returns were negatively correlated to high CAPE ratio readings on a relative basis.Shiller CAPE PE Ratio Chart
The CAPE ratio is currently 28.4, which is its highest level except for the time periods right before dot-com bubble burst and late 1920s market crash.
Leuthold Group's Doug Ramsey notes that the S&P 500's trailing price-earnings ratio is in the 90th percentile level since 1920. But he isn't worried ... yet.