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The Tell: Here’s why the stock market is still the ‘cleanest dirty shirt’

Think the stock market is overpriced or maybe even in a bubble? Think again, say analysts at Barclays.

In the note, entitled “Uncomfortably Bullish,” they argued that global equity valuations remain in line with longer term averages and below the previous cycle peak, while the outlook for global earnings per share remain the best in nearly five years. Compared with other pricey assets, equities remain the “cleanest dirty shirt” available to investors, they argue in one chart (see below).

That doesn’t mean there aren’t sources of worry, including stretched U.S. stock market valuations, wrote the analysts led by Dennis Jose. The Shiller cyclically adjusted price-to-earnings, or CAPE, ratio at 30.6 remains very elevated, they acknowledged.

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