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Forward Returns Continue To Fall One of the interesting aspects of “bull markets is the further they go, the lower forward returns fall. In hindsight, such an idea seems counter-intuitive, but ultimately it always comes down to valuations. As Warren Buffett once quipped: “Price is what you pay. Value is what you get. Please share this article - Go to very top of page, right hand side, for social media buttons. ( When markets are incredibly exuberant, as they are currently, it is not surprising that such is commonly associated with previous market peaks. The chart below shows the annual rate of change of the inflation-adjusted S&P 500 index from March to March. The recent market surge marks one of the largest on record. Such increases typically preceded corrections (10-20%) to outright bear markets. ....
In last week’s Reducing Risk post we discussed why we reduced risk in anticipation of a pullback in the markets. However, there are some warning signs which beg the question “is a larger correction coming? Please share this article - Go to very top of page, right hand side, for social media buttons. A Tough Start What started out as a promising January, didn’t end up that way as markets dipped into the red for the year. More importantly, February tends to be a weak month which suggests the selling may not be over just yet. Such is particularly the case, as we will discuss momentarily, with many areas of the market technically stretched and over-valued. ....
The Problem With Analysts Forecasts We can’t predict the future. If we could, fortune tellers would all win the lottery. They don’t, we can’t, and we aren’t going to try. However, this doesn’t stop the annual parade of Wall Street analysts from putting out forecasts on the S&P 500. Please share this article - Go to very top of page, right hand side, for social media buttons. The Problem With Forecasts In reality, all we can do is analyze what has happened in the past, weed through the noise of the present and try to discern the possible outcomes of the future. ....