No, stocks are still not cheap

Stock values haven't come down; instead, the cost of money has gone up. The equity investor deciding where to put their money will need to do better than ogle recent highs.

With the Nasdaq-100, a technology-focused index of American-listed companies, down by a fifth this year, the prospective value investor may reason that stocks are cheap. After all, prices are markedly below their 52-week highs, yet companies have expanded. As one Twitter user said, "Facebook is the same price as in 2017 when revenues and earnings were a quarter of the size they are today." Sounds compelling. Indeed, what goes down must come back up, right? While this reasoning is intuitive, it is also dangerous. To borrow a phrase, it’s like 'driving in the rearview mirror.'

Stocks are not cheap; they're just not as expensive as they have been for the last 24 months. To crystallise what this means, imagine a discount retailer marking down an artificially marked-up price: "was $99, now just $9," when the recommended retail price is $10.

For the 20 years that followed the new millennium, investors priced common stock in public American companies to return 8.13% per year. However, when the…