Is the US stock market bound to hit the skids?

Those who claim that the US stock market is bound to hit the skids soon point to the fact that Shiller’s cyclically-adjusted price/earnings ratio is now more than double its long-run average of 14. However, their argument is based on a misconception that this average is a normal level to which the ratio will inevitably revert. It fails to recognise that investors’ required return from US equities has fallen.