http://www.marketwatch.com/story/are-stocks-undervalued-2011-09-06

Hulbert does a quick analysis comparing today’s stock market’s P/E – both trailing and projected forward – against historical norms.  And he finds that based on that analysis, stocks may appear either undervalued or perhaps pretty fairly valued – but they certainly don’t look particularly expensive.

While it’s hard to argue for any kind of market-timing – nobody really can do that very well since short term movements are too unpredictable – this does make a reasonable case that there’s no reason to shy away from moving your portfolio to the asset allocation and risk level (meaning putting enough into equities) to keep you on the path towards achieving your long-term investing goals.

The danger is that the times when such measurements scream “overvalued!” is also the time when it’s hardest to sell off stocks, as that’s typically after a huge run-up and right then it’s difficult to sell what looks like something that’s winning.  That’s when the value of a target asset allocation and systematic rebalancing really shines – when equities are most expensive – right after they’ve gone way ahead of themselves – is exactly when to rebalance by selling some off and getting your asset allocation back to your target.

Hulbert’s observations are always worth noting.