In general, when someone says the market is "overvalued", they mean that the current value of their given valuation yardstick (like CAPE or any of the other metrics you named) is high in relation to that metric's historical mean, and they fear that the market will revert to the mean.
Right - you need to select a metric (such as CAPE or Q) in order to make a determination as to whether a given market is overvalued.
And part of this thread is discussing whether the historical means for these metrics are valid any longer -- or if the mean is artificially low, given how much things have changed in the past 100+ years.
I'm just making the point that when virtually all valuation metrics are showing the same thing (that markets appear to be valued much higher than historical norms) it seems extremely likely to me that the markets are, in fact, actually overpriced.
But, of course, the market has spent (and no doubt will continue to spend) periods of time (sometimes extended periods of time) in deviation from its mean, in a non-perfectly-symmetrical way, so it's not the case that the market has spent (or will spend) half the time "above average" and half the time "below average."
Yes, you're right - a sloppy statement on my part. Another flaw in my initial statement: Data excludes the last X years, where X is (retirement term - 1).
The central point remains though, which is that the history based calculators have no sense of valuations, and valuations do affect your chance of success. Again, although we can have a discussion about the degree to which it matters, it's a fact that it matters.
(personally I am "cautiously optimistic" about the future).
Same. Ideally you want to be aware of the risk, have backup plans (mine is called floor spending), and stay the course on your AA no matter what happens. I'm not advocating that people start panicking, nor am I suggesting that everyone over-save.
I would give greater weight to spending flexibility. In my view, the primary reason history-based success rates are overly conservative is their unrealistic assumption that the retiree will robotically make the same fixed constant-dollar withdrawals year after year.
Yes, I agree with this completely, and runs with cFIREsim bear this out -- spending less during downturns helps success rates enormously. And in the real world, practically nobody blindly spends the same amount regardless of current conditions.
4% will be fine for the vast majority of people, even if they're retiring when indicators show that markets are somewhat high.
I will also add that Vanguard itself feels that markets are overvalued.
See video:
https://personal.vanguard.com/us/insights/video/3241-Exc1Skip to about 3:25
Quotes:
"Valuations are the key to future returns"
"Valuations are certainly richer... don't want to call it "bubble territory" but certainly higher multiples relative to history .."
"US valuations... on the richer side of history"
"This is one of the reasons we believe over the next 10 years, average equity returns will be below historical norms -- and it's because we're starting from [this higher valuation position]"
"We don't think there will be a deep, deep drop ... but [our predictions] are certainly a reflection of where valuations are today."
This is finance speak for: Be cautious about current conditions.
edit: Fixed link