http://www.johnjazwiecblog.com/2017/01/beware-of-the-shiller-pe-ratio-1.html

I wrote this post almost exactly 18 months ago. The ratio at that time was 28

The historical mean and and median is between 16 and 17.

During the dot.com boom it rose to an irrational exuberance of 44. The market eventually dropped like a rock.

During the run up to the 2008 Financial Crisis it rose to the Black Friday level of 30.

What is it today? 

32.2

What is driving this irrational exuberance today? Less than 3% interest rates. There is no place to park the money other than the stock market in order to seek yields that are inspiring.

If the ratio was 28, 18 months ago and it is now 32.2 - with 3% GDP growth and earnings growth (culling out stock buybacks - the earnings basket of all stock must correlate to GDP growth) - that means that investors are paying 15% more for stocks.

Does paying 15% more for stocks make sense with 3% GDP and earnings growth? No. 

Add in the risks of inflation for the tariffs and the explosion of national debt to pay for corporate tax reduction - which would/will require interest rate hikes by the FED - and you have the inevitable sharp correction on the horizon. Worst case scenario is a ratio contraction of 50% back to the historical mean.

And history tells us that isn't sustainable.