It’s that time again. The time when I review the market’s performance and important metrics for the quarter.
In short, it was a strong quarter for most assets. However, market valuations continue to get stretched to extremes implying the ultimate snapback will need to be that much greater. In fact, valuations have only been this high two other times since 1900. The first time was right before the Great
Depression and the second time was at the Dot-Com Bubble
Therefore, it is reasonable to expect subdued returns over
the next ten years and plan accordingly.
Q2 Market Performance
I’ll just briefly summarize various index returns for the quarter so we can get to more meaningful insights. International stocks continue to be the top performer.
U.S. Stock Market Valuations
Today’s price of a future cash flow determines your return. For instance, if you exchange $50 now to receive $100 in ten years that implies a 100% return. If, however, you exchange $90 today for that same $100 in ten years your return drops to 11%. So price paid today is extremely important in determining future returns.