As of early January 2021, the US stock market P/E ratio is in the top few percent of its historical range while the economy is in the worst few percent.

There are two parts, both judged as of early January 2021. (1) Valuation: a standard US market P/E measure (Shiller CAPE or trailing/forward S&P 500 P/E) for late December 2020 or early January 2021 must sit in the top few percent of its own long-run history, meaning about the 95th percentile or higher. (2) Economy: standard measures for 2020 or late 2020 must rank in roughly the worst 5% of the historical record. Suitable measures are the US real GDP contraction, the unemployment rate or the output gap. For quarterly or annual GDP change, use the postwar or long-run US series. True: both parts hold on at least one standard measure. Mostly true: valuation clearly holds, and the economy is in the worst decile but not quite the worst few percent (or the reverse). Mixed: one part clearly holds and the other clearly does not, for example the economy was weak but not near the historical worst on any standard measure. Mostly false: valuation was high but well below the top few percent, and the economic part also fails. False: neither holds, for example P/E near its historical median.

Set before the research began.

1. E1 Shiller PE Ratio Today: 39.8 — S&P 500 CAPE Ratio by Year Since 1881 | ChartRow ChartRow

   “| 2021 | 34.5 | — |”

2. E2 Shiller PE (CAPE) Historical Data | StockDoz StockDoz

   “| January 1, 2021 | 34.51 | +2.21% |”

3. E3 What the US GDP data tell us about 2020 - Jason Furman and Wilson Powell III Harvard Kennedy School, Mossavar-Rahmani Center for Business and Government · 28 January 2021

   “The US economy contracted 3.5 percent on an annual basis in 2020, the largest contraction for any full year since the demobilization from World War II in 1946.”

4. E4 2020 was the economy's worst year since 1946 Axios · 28 January 2021

   “For the full year, the economy shrank by 3.5% — the first annual contraction since the financial crisis and the worst decline since 1946.”

5. E5 Unemployment rate rises to record high 14.7 percent in April 2020 U.S. Bureau of Labor Statistics, The Economics Daily · 13 May 2020

   “The unemployment rate in April 2020 increased by 10.3 percentage points to 14.7 percent. This is the highest rate and the largest over-the-month increase in the history of the data (available back to January 1948).”

6. E6 Gross Domestic Product, Second Quarter 2020 (Advance Estimate) and Annual Update U.S. Bureau of Economic Analysis · 30 July 2020

   “Real GDP decreased 32.9 percent (annual rate) in the second quarter of 2020, following a 5.0 percent decrease in the first quarter.”

7. E7 THE EMPLOYMENT SITUATION—DECEMBER 2020 U.S. Bureau of Labor Statistics · 8 January 2021

   “Total nonfarm payroll employment declined by 140,000 in December, and the unemployment rate was unchanged at 6.7 percent, the U.S. Bureau of Labor Statistics reported today.”

8. E8 Main navigation U.S. Bureau of Economic Analysis · 28 January 2021

   “Real GDP decreased 3.5 percent in 2020 (from the 2019 annual level to the 2020 annual level), compared with an increase of 2.2 percent in 2019 (table 1).”

The economic part is supported. BEA and Harvard sources report that real GDP fell 3.5% in 2020, the largest full-year contraction since 1946 (E3, E4, E8). Q2 2020 saw a 32.9% annualised drop (E6), and April 2020 unemployment was the highest on record back to 1948 (E5). For valuation, the evidence gives a Shiller CAPE of about 34.5 for January 2021 (E1, E2), but neither quote places that figure against the long-run history, so the evidence does not show whether it was at or above roughly the 95th percentile. Both parts must hold, and the valuation part cannot be confirmed from the evidence provided.