If you take today's S&P as fairly valued, which may in fact be over-optimistic, then you can work out the past fair value of the index, based on a given assumed return for stocks. For example, let's say stocks are expected to return their long-term average of 10% per annum. You can go back to a point in time, then work out the index level that would have compounded at a total of 10% per annum, to get to today's price in late 2010. Based on this calculation, every year since 1990 would have returned less than 10% from that point up to 2010 for stocks, including reinvested dividends. Every year since then, the index level was above the level that would have been needed to see a 10% return. The only times they were fair value or less were late 2008-2009, and 1990. It's also interesting to see the degree of overvaluation. In 2000 at the top, the S&P fair value was around 500, the actual price went slightly over 1500, so it was 200% overvalued. This is pretty much what the bears said at the time, and they were exactly right. All the bull arguments were totally wrong. The Nikkei is even worse, it has been overvalued for 3 decades. So much for efficient markets and stocks for the long run. Valuation matters.