Is the Stock Market Cheap?

[clifp]

Quote:

Originally Posted by audreyh1 I thought you only needed a little over 1% real return. I must be remembering things wrong.

You would be correct if the 1% real rate was constant. But the sequence of returns matter a lot. Normally stocks and bond have very low correlation, and this century have had a negative correlation -.55. However, it is entirely possible that a pick up of inflation+interest will decrease the real value of both stocks and bonds at least over the next few years.

This in turn would make it tough to withdraw 4% even if the overall return for a 60/40 portfolio was 2.2%.

[imoldernu]

Not being very smart in the area of finance and investing, I probably shouldn't post here, but since we're in a period of "Who do you trust?", it's probably ok to at least voice an opinion.
40% of all US based corporate revenues are generated overseas.With the advance of the US dollar against other major currencies, doesn't this artificially distort the current PE? Are the PE10 numbers becoming a shadow banking phenomenon?
In looking at the instability of international markets and the soaring debt. I wonder if we may be getting beyond historical charting. The smoothing from PE10, or PE30, over history assumes a relative international monetary balance as it has existed for decades. As we see mountainous levels of debt growing, leverage at unprecedented levels, and fiat currencies being included in projections, are the Schiller charts still predictive? How do we fit QE into the charts?
The second part of the "earnings" that seems to be hitting many businesses, is where technological progress may be coming to the point of diminishing returns, ala the most recent flap concerning Walmart coming up against a profit wall. The single most variable profit factor of payroll, which reduction has contributed greatly to increased bottom line profits in almost all industries may well stress consumer spending and come full circle in diminished profits. Consider today's jobs outlook. Does anyone really believe in a return to significantly lower unemployment numbers?
Some have said that corporate 10 year plans have been replaced by quarterly profit adjustment panics. Is this the time to trust in market projections? Are the variables of today even close to those that affected the historical ups and downs that make up the historical charts?

Anyway, as of today, the market it still going up, so somebody has to know something, eh?

[photoguy]

Quote:

Originally Posted by EvrClrx311 When looking back 150 years, every period of time where the market has performed as bad as it has the last decade, we've seen a very positive run in the market the next couple decades.

I guess you are referring to the US market? and not other markets like Japan? There's a strong danger of survivorship bias here.

That said, I actually feel very positive about future returns. Maybe it's just magical thinking, recency bias, and rationalizing that I have large portions of my portfolio in international/small/value all of which have higher expected returns.