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Please don't overreact to this headline. It is only a forecast made by the Reseach Affiliates outfit. Maybe they're prescient, but maybe not.
The Reseach Affiliates forecast is grounded on the assumption that a regression-to-the-mean of the CAPE ratio is imminent and will take that ratio to below or near below its historical average. That's possible, but is it likely? I surely do not know.
The Research Affiliates are saying that the CAPE downward adjustment will be so dramatic that it almost totally neutralizes the positive inputs of demographic growth and productvity growth in the US marketplace. Their prediction is that US equities would be marginally positive in this next 10-year cycle and small US equities ( Russell 2000 ) would deliver zero positive inputs. Meanwhile foreign markets will produce positive rewards that exceed their historical averages.
I fail to see this major disconnect between the US and foreign markets, especially with emerging markets. Our economies are just too intertwined. Although we now have a lower percentage of the world markets, we are still the dominant player. If we sneeze, foreigners will catch a cold.
I interpret the Research Affiliates projection with more than a few grains of salt. For the most part, forecasters accuracy records are miserable. As usual, buyer beware.
Comments
Please don't overreact to this headline. It is only a forecast made by the Reseach Affiliates outfit. Maybe they're prescient, but maybe not.
The Reseach Affiliates forecast is grounded on the assumption that a regression-to-the-mean of the CAPE ratio is imminent and will take that ratio to below or near below its historical average. That's possible, but is it likely? I surely do not know.
The Research Affiliates are saying that the CAPE downward adjustment will be so dramatic that it almost totally neutralizes the positive inputs of demographic growth and productvity growth in the US marketplace. Their prediction is that US equities would be marginally positive in this next 10-year cycle and small US equities ( Russell 2000 ) would deliver zero positive inputs. Meanwhile foreign markets will produce positive rewards that exceed their historical averages.
I fail to see this major disconnect between the US and foreign markets, especially with emerging markets. Our economies are just too intertwined. Although we now have a lower percentage of the world markets, we are still the dominant player. If we sneeze, foreigners will catch a cold.
I interpret the Research Affiliates projection with more than a few grains of salt. For the most part, forecasters accuracy records are miserable. As usual, buyer beware.
Best Wishes.
Link to his paper:
The Shiller CAPE Ratio:A New Look by Jeremy J. Siegel