The stock market is not attractive at this price - but it could be worse

Stocks are historically expensive.

In a recent note, Citi's Tobias Levkovich says that the S&P 500's current price-to-earnings valuation is far from ideal for historically great returns. The current valuation, or the dart on Citi's chart below, is much higher than the market average going back to the 1880s.

"The dart reflects the 17.59x P/E multiple of the S&P 500 based on trailing four-quarter S&P 500 Operating EPS," he wrote.

Since 1940, the average 12-month return when stocks are at this level has been 5.4% with the median return at 9.1%.

And while this might not be that attractive, it could still be worse: when the S&P 500's P/E was over 20, stock were lower over the next 12 months on average.

As you can see, the best annual returns came, on average, when stocks were valued at a P/E ratio of 8 or less.

And here's a reminder of how expensive stocks are: