Happy 2026, everyone! If you’ve been watching the news and charts lately, you’ll notice that global equities are hitting All-Time Highs (ATH). Even our local Straits Times Index (STI) has been on a record-breaking run, recently breaching the 4,800 mark.
When markets are this "hot," it’s natural to feel a mix of excitement and "FOMO" (Fear Of Missing Out). But for someone who have been through times like this before (E.g 1997/98, dot com, GFC, etc), I like to look at the numbers before jumping in.
The Reality Check: PE Ratio & Standard Deviation
To understand if we are overpaying, I look at two "health markers":
Price-to-Earnings (PE) Ratio: Currently, the STI is trading at a forward PE of around 16x. Historically, our market is "cheap" when it’s below 12x and "fair" at 14x. While we aren't at the crazy levels of the dot-com era, we are certainly no longer in the "bargain bin." We are paying a premium for expected earnings growth in our banks and blue chips.
Standard Deviation (SD): In technical terms, the STI is currently above the +2 Standard Deviation level. The STI is currently trading above the "Extreme Optimism" line, history has shown that they rarely stay there for long before "reverting to the mean" (the blue center line).
How I Am Investing Now
I’m not selling everything, but I am being cautiously selective. For now, I am still doing dollar cost for my world index etf, but only when it starts to pull back like the recent news on the Greenland. For correction, you can refer to this post on what I normally would do. You can also check out this post to see if your retirement fund is able to withstand any market shock.
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