American stocks are at their most expensive in decades

Try a little, and it is never too hard to argue that the stockmarket looks risky and a crash must be coming. But in the long run such arguments are usually best ignored. Since 1900 American shares have posted an average real return of 6.4% a year. Over three decades, that would transform the purchasing power of $1,000 into $6,400. Bonds, the main alternative, do not come close. With an average historical return of 1.7% a year, they would generate a measly $1,700. Cash would do worse still.The lesson for today’s investors, many of whom were caught out by this year’s bull market, might seem obvious. Forget about a that may or may not materialise. Just buy and hold stocks, and wait for returns that will erase any number of brief dips. Unfortunately, there is a catch. What matters today is not historical returns but prospective ones. And on that measure, shares now look more expensive—and thus lower-yielding—when compared with bonds than they have in decades.