That said, it can be helpful to zoom out and take a big-picture view from time to time. To do so, I updated a chart included in Morningstar\u2019s Markets Observer<\/a> that depicts seven key metrics and where each one stands relative to its range over the past 20 years. I like this chart because it packs in so much information; even without reading all the details, you can glean that six of these seven metrics currently stand at pretty high levels relative to their historical ranges. Writ large, that suggests some caution may be warranted.<\/p>\n Current level:<\/b> Very high<\/p>\n What it means:<\/b> Gold has been on a tear but be wary of chasing performance.<\/p>\n As I wrote in a recent article<\/a>, gold has been the top-performing major asset class over the past 20 years, and also gained more than 31% for the year to date through Aug. 31, 2025. This performance has partly been driven by central banks around the world buying up gold as they \u201cde-dollarize\u201d their reserve assets, as well as other investors seeking a safe haven amid macroeconomic turmoil and geopolitical uncertainty.<\/p>\n Those trends could continue, but there\u2019s also additional risk now that gold is trading at such a pricey level. Academic researchers Campbell Harvey and Claude Erb have found<\/a> that, over time, gold prices tend to revert to the mean. When gold is trading at elevated prices in inflation-adjusted terms, prices have often declined in subsequent periods. That happened in 1980, when steep prices were followed by a long period of sluggish returns during most of the following decade. The same pattern showed up when the real price of gold reached a peak in August 2011, which was followed by a sharp downturn from 2013 through 2015.<\/p>\n In short, the recent runup in gold means potential risk is even higher than usual. In my opinion, it\u2019s prudent to limit any gold exposure to 5% of the total portfolio (or less). And it\u2019s important to keep in mind that the current bull run probably won\u2019t last forever.<\/p>\n Federal-Funds Rate<\/p>\n Current level:<\/b> Relatively high<\/p>\n What it means: <\/b>Even after a rate cut, yields on cash are still higher than inflation, making fixed-income securities relatively attractive.<\/p>\n The midpoint of the target range for the federal-funds rate stood at 4.33% as of Aug. 31 (the date for all of the data above) but has since declined to about 4.15%. However, the fed-funds rate remains significantly higher than its low of 0.04% as of late 2011, when the Federal Reserve\u2019s zero interest rate policy reached its nadir. In the wake of the global financial crisis, the Fed aggressively dropped short-term rates to near zero to stabilize the economy. It also purchased US Treasuries and agency mortgages as another way to keep bond yields low. ZIRP and successive rounds of quantitative easing led to a nearly 15-year period of low borrowing costs.<\/p>\n Fast forward to March 2022, and ZIRP became a distant memory as the Fed embarked on a series of aggressive interest-rate hikes to tamp down inflation. But even now that rates have once again been moving lower, yields on cash and short-term securities remain relatively attractive. For example, the three-month Treasury bill yield of about 3.98% as of Sept. 19, 2025, remained well above the most recent annual inflation rate of 2.90%. As a result, investors saving for short-term goals<\/a> don\u2019t need to worry about the value of their savings eroding over time, at least for the moment.<\/p>\n More broadly, yields on high-quality fixed-income securities remain significantly higher than they were a few years ago. When rates were extremely low, there was nowhere for yields to go but higher and nowhere for bond prices to go but lower. Now we\u2019re clearly in a different environment, making bonds more attractive than they were a decade ago.<\/p>\n US Market P\/E<\/p>\n Current level: <\/b>High<\/p>\n What it means:<\/b> Domestic stocks are priced at steep levels, making international diversification even more important than usual.<\/p>\n US stocks have been the second-best-performing major asset class over the past 20 years (falling just slightly short of gold over that period). Aside from a couple of brief downturns in 2018, early 2020, and 2022, domestic equities have continued to power ahead, with price gains driven by growth in corporate earnings as well as multiple expansion. As a result, the overall price\/earnings ratio for the Morningstar US Market Index has more than doubled from its low of 10.19 in the wake of the global financial crisis. The benchmark\u2019s P\/E as of Aug. 31 was down slightly from a peak of 28.61 but still on the high end of the range over the past 20 years.<\/p>\n Equity valuations could remain elevated if corporate earnings continue to deliver, but high prices also mean stocks have more room to fall if growth falls short of expectations. And now that valuations have already climbed higher, there\u2019s not as much room for future multiple expansion as a driver of equity market returns.<\/p>\n![\"A](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2025\/09\/R7B7DECURVFDNKVJBMESG4EPFI.png\")
Source: Morningstar Direct, Federal Reserve Bank of St. Louis, and National Association of Realtors. Minimums and maximums are for the period from Sept. 1, 2005, through Aug. 31, 2025. Gold<\/p>\n