What a Nobel Prize-winning economist thinks about the stock market.

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Nobel Prize-winning economist Robert Shiller is not particularly alarmed by what some market watchers argue are troublingly high valuations in the stock market.

In a wide-ranging conversation with DoubleLine Capital CIO Jeffrey Sherman at the Wealth Management EDGE conference, Shiller addressed the current state of the widely-followed cyclically adjusted price-earnings (CAPE) ratio for the S&P 500.

"It has come down into the low 30s," he said. "It kind of puts us where we were in other times in history that were relatively extreme."

"But you know, the stock market has performed very well over the last 100 years," he added. "I like to look at long-term time horizons. And so when it's highly-priced, it doesn't necessarily make it a horrible investment."

For many in the investing community, CAPE is a north star when thinking about expected returns in the stock market.

The market is considered expensive when it's above its long-term average of 17.

While a high CAPE ratio may trigger bubble alarms for some folks who think it's a good time to avoid stocks, Shiller has cautioned that it's not a very reliable market-timing tool.

Instead, he'd tell you that an elevated CAPE ratio at best signals low returns on average in the years to come.

Just because valuation ratios are high or low doesn't necessarily mean it's a good or bad time to buy.Indeed, CAPE has spent most of the past 20 years above its long-term average, and stock prices are much higher today than they were 20 years ago.

There's a good argument to be made that higher interest rates should make for lower valuations. But for now, interest rates continue to be close to historic lows.

And even if we are entering a regime where valuation ratios will be lower than where they have been in recent history, stock prices are not doomed to follow suit as long as earnings continue to move higher.

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