Apparently many of you are living in a universe where valuation multiples and bear markets are not things. In that universe any attempt to handicap future returns is futile, as the markets are completely random. For the rest of us, there is plenty to be learned from history.
This bull market started near the long-term trendline of real returns for equities (6% real) and middle-of-the-road valuations (price:sales of 0.9) and then compounded at 17% for 8 years despite low single-digit percentage earnings and sales growth. Valuations like we have today have always been followed near zero returns for a decade, with bear markets sooner rather than later.
This chart from a friend of mine shows the min, max and average returns from various starting sales/price ratios for the S&P 500. To be long now except on a short-term momentum basis is to be locking in worse returns than bonds with crazy downside risk:
Submitted June 27, 2017 at 11:43AM by michaelritger http://ift.tt/2tgJxOq
