Market Valuation, Inflation and Treasury Yields: February 2026

Market Valuation and Inflation - US stock indexes are significantly overvalued, indicating cautious expectations for investment returns [1] - The P/E10 ratio is a key indicator of market valuation, with a historical average of 17.7 [1] - Current P/E10 stands at 39.0, with a year-over-year inflation rate of 2.31%, placing it within the "sweet spot" of 1.4% to 3.0% inflation [1][1] Correlation with Treasury Yields - The current monthly average of the 10-year Treasury yield is 4.13% [1] - The analysis shows a correlation between P/E10 and the 10-year Treasury yield, with current valuations in extreme territory [1] - The post-financial crisis period has seen P/E10 ratios above 20 and yields below 2.5%, deviating from historical patterns [1]