The S&P 500 Costs 27.5 Times Earnings. History Says What a Starting Multiple That High Buys You Over 10 Years.

The Vanguard S&P 500 ETF trades within about half a percent of its 52-week high.

In January 2000, the S&P 500 traded at 29 times earnings, and the following decade's total return was slightly negative.

Vanguard's models now forecast U.S. equity returns of 4.2% to 6.2% annually over the coming decade, citing elevated valuations.

As of this writing, the Vanguard S&P 500 ETF (NYSEMKT: VOO) sits within about half a percent of its 52-week high of $714.16, trading around $710. Behind that price is a market that costs about 27.5 times its companies' earnings, far above the long-run average of about 16 for the S&P 500 (SNPINDEX: ^GSPC) .

Setting aside stretches when collapsing profits inflated the ratio, as in 2008, the market has sustained a level this high in only two eras. One was the late 1990s. The other is the past two years.

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Paying that much per dollar of earnings has had almost no bearing on what stocks do the next month, or even the next year. Over a full decade, it has mattered enormously.

So when investors have bought the index at a starting price like this one, what has the following decade actually paid?