This chart can tell you a lot about bull and bear markets in the long run:
The source of the chart is an article by Jurrien Timmer of Fidelity Management & Research. Do read the whole thing, it's interesting throughout.
The above chart provides a perspective that is rather similar to our own, as computed by our flagship application, Robot Investment Calculator:
Note that we use CPI-unadjusted returns, unlike Jurrien Timmer. Still, the overall picture of relative valuation is not very different. (RIC does not go that deep into history, but we could see a similar pattern if it did.)
Unlike Jurrien Timmer, we do not use a long-term exponential regression curve. Instead, we work with MZM, which is a money supply aggregate that includes instantly liquid money.
In the short run, our MZM-based valuation indicator can hint to overvaluation or undervaluation of the market. The COVID19-related monetary expansion made the market significantly undervalued until June 2020. Through August, however, the market grew more than 10 per cent into the 'overvalued' territory. This may signal an increased risk of a correction. (No more ground-shaking events on the horizon, though.)