We’ve seen that stock market investors have been
However, the FactorResearch article
For stocks, we have a historically low earnings yield (or historically high P/E ratio). While the correlation is not as high, a low earnings yield usually leads to low future equity returns:
Based on this combination of low starting interest rates and low starting earnings yield, the author’s model predicts an annualized average return of 3.1% nominal for a traditional 60% stocks/40% bonds portfolio over the next 10 years.
(Time to set a reminder for 1/1/2030!)
These predictions can be dangerous in terms of market timing. Low interest rates and relatively high valuations were also true a year ago, but then the US stock market went up another 30%! If you avoided stocks, you would have missed a huge gain only to find yourself with even lower forward return expectations. Returns are lumpy – there might be only a few big positive years and many negative years to average out to a 5% return. What if you just missed one of the huge positive years?
My only takeaway is to maintain both stock market exposure and reasonable expectations. Various factors combined to make 2019 a big year for stocks (and
“The editorial content here is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone. This email may contain links through which we are compensated when you click on or are approved for offers.”
Copyright © 2019 MyMoneyBlog.com. All Rights Reserved. Do not re-syndicate without permission.