I have just completed my annual review of U.S. Stock Market Valuations and updated my 12-year forward return matrix. I share that with you below.
I also share a valuation metric created by Dr. John Hussman, of Hussman Funds, which is highly (inversely) correlated to forward 10-12 year stock market returns.
Both metrics indicate the most extreme valuations for the U.S. stock market going back to their respective inception dates (2000 for my matrix and all the way back to 1928 for Dr. Hussman’s proprietary metric).
Extremely high valuations imply returns for the U.S. stock market over the next 10-12 years could likely end up well below historical average returns, perhaps even negative for the full 12-year period, if not potentially one of the worst 10-12 year periods in history for the U.S. stock market.
My matrix of 12-year forward returns shared below illustrate the potential range of total returns for the U.S. stock market over the next twelve year period is a 6.8% annualized loss to a 2.0% annualized gain. Note that the long-term historical average annual return is around 10%.
To learn more about how I create the matrix, the methodology, rationale, etc… check out my write-up at (and bookmark), this site: https://melottefa.com/projected-market-returns/
Below you’ll find Hussman’s proprietary valuation metric that goes back to 1928 and has a high correlation to subsequent 10- and 12-year returns. Notice we’re at the most extreme valuations for the U.S. stock market going back almost 100 years.
Dr. John Hussman, “How I Learned To Love The Bubble (Even Before It Bursts)”
Disclosures:
Past performance is no guarantee of future results. All investments maintain risk of loss in addition to gain.
Data from third-parties is believed to be reliable but accuracy is not guaranteed. Much of the data used to interpret the markets and forecast returns are often at odds with each other and can result in different conclusions.S ome data may be outdated.
This is not investment advice but merely a general commentary. Individualized investment advice cannot be provided until a thorough review of your unique circumstances and financial goals is completed.
Views provided here are current only as of the moment of posting and are subject to change at any time without notification.
