Investing in overvalued markets:
Dollar cost averaging from the year January 1995 to December 2009 a 15
year time span results are as follows:
Before inflation average annual return was 3.80%!
AFTER inflation average annual return 1.17%
Bonds during that same time period return for 100% bond buyer dollar cost averaging annual return was 7.17% and AFTER inflation was 4.69% or 275% greater return than stocks.
Once again were back in overvalued markets easily seen by any valuation based chart for the S&P 500.
Future returns for stocks bought or held today over the next 10 to 15 years can expect the average annual return between negative 2% to a positive 2% BEFORE inflation. Along the way expect massive drops in the area of 30% to 50% as the market roller coaster's its journey as economic and financial gravity regress’s valuations back to its mean.
The reason the Always Be Buying (ABB) crowd (S&P 500 index) is now so pervasive is due to recency (looking in the rearview mirror) as stocks have done wonderfully since 2009 with valuations starting BELOW their historical mean (S&P 500 Shiller PE at 15 mean is 17). Today the Shiller PE is 42.18 average historical mean since 1871 is 17.39 doing a bit of arithmetic (41.43 - 17.39) ÷ 17.39 x 100 = 138.24% above the mean.
Buy and hold stocks at your own risks. There's a time to hold, a time to fold, and a time to walk away.
The unloved asset: BONDS
Long term investment quality corporate bonds currently (7-13-2026) yielding 5.95% (Vanguard's
VCLT) that is unloved by the S&P 500 passive investing crowd. Vanguard’s flagship fund the S&P 500
index fund symbol VOO dividend yield is a scant 1.03%! VCLT bond yield is 478% higher
than it counterpart VOO at 1.03%! Simply
put bonds are now unloved as they’ve ever been since 2020!
Following the 1815 market panic after the Battle of Waterloo, Rothschild’s
of France supposedly said, “Buy when there’s blood in the streets, even if the
blood is your own.”
Find me a bull for bonds!
You came up short??
Yep; long term bonds are in the dog house but as they say every asset category has its period of fame or shame. IMO I’ll take the bonds for this cycle lowering my risk while achieving a reasonable return waiting for the next asset category to become gloriously undervalued.
Disclaimer
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
No comments:
Post a Comment