Great original post by @HondoTomasz.
Large-cap equities in the US are not priced as a "great deal" or a lifetime buying opportunity right now. Obviously, this is looking at a broad base index.
There are a few more valuations metrics I would include... (continued)
Large-cap equities in the US are not priced as a "great deal" or a lifetime buying opportunity right now. Obviously, this is looking at a broad base index.
There are a few more valuations metrics I would include... (continued)
As of February 2020, when S&P 500 was trading at 3,400 points or so, Warren Buffett's favorite indicator (US market cap over US GDP) was 1.5 standard deviation from the mean.
This has historically indicated low single-digit returns for the US large caps.
This has historically indicated low single-digit returns for the US large caps.
Tobin's Q Ratio, which S&P 500's cost of replacement (meaning we are not using either revenue nor earnings data) shows a possibility of negative 10-year returns going forward.
Similar valuations to today were seen in 1929, 2000, and 2018.
Similar valuations to today were seen in 1929, 2000, and 2018.
Finally, with a 91% correlation since the 1950s, US Household Equity Holdings do a great job predicting the future expected return of US large-caps.
Coming into Q1 2020, US stocks were priced for 2-3% total annual return from 2020 to 2030.
Nothing exciting to write home about.
Coming into Q1 2020, US stocks were priced for 2-3% total annual return from 2020 to 2030.
Nothing exciting to write home about.
