As individual investors who have a limited time to financially “Put it all together” whether for retirement or other goals market valuations is crucial for our success. 

The past 10 years (and especially since 2009) we’ve experienced a scorching hot stock market that has pushed valuations to nose bleed levels.  Add on the fact that the past ten year return almost hit 15% average annual return expecting another redo is investing by looking in the rear view mirror as this would require stock valuations to almost double from history making levels!

Points of ‘secular’ undervaluation such as 1922, 1932, 1949, 1974 and 1982 typically occurred about 50% below historical mean valuations, and were associated with subsequent 10-year nominal total returns approaching 20% annually. 

By contrast, valuations similar to 1929, 1965 and 2000 were followed by weak or negative total returns over the following decade. That’s the range where we find ourselves today. 

If the Dow Jones Industrial Average breeches the 50,000 level expect Wall Street cheerleaders pushing their talking points for stock ownership in order to “off load” as much as possible their high valuation priced shares.  This has already begun with major players such as Warren Buffet’s corporation pulling into his highest cash position.