Gone4Good
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Sep 9, 2005
- Messages
- 5,381
As measured by P/E-10 (currently 11.8x), stocks have traded this cheap or cheaper during 10 different periods over the past 100 years. Someone who bought the S&P 500 at the beginning of any of those 10 periods always earned positive returns over the next ten years (with reinvested dividends). Average returns were 11%. The lowest return was 5.8%, earned from October 1931 to September 1941.
So the worst historical 10-year return for stocks bought at current valuations of 5.8% beats money market funds yielding 1%, 10-year treasuries yielding 2.87% and very nearly beats intermediate investment grade corporate bonds yielding 6.11% (for VFICX). Meanwhile median returns for stocks over these 10 periods were close to 10% with the best 10-yr return reaching 18.6%.
SPX returns over the 10 year period immediately following a P/E-10 valuation of 11.8x:
Oct 1946 - Sep 1956 . . . . 18.61%
Sep 1953 - Aug 1963 . . . . 16.04%
Nov 1941 - Oct 1951 . . . . 15.97%
Jul 1974 - Jun 1984 . . . . . 11.97%
Dec 1916 - Nov 1926 . . . . . 9.77%
Apr 1938 - Mar 1948 . . . . . 9.52%
Aug 1934 - Jul 1944 . . . . . . 9.41%
Oct 1907 - Sep 1917 . . . . . 7.54%
Jun 1913 - May 1923 . . . . . 7.17%
Oct 1931 - Sep 1941 . . . . . 5.78%
Many of us have been planning on below average stock returns because of high valuations. Well, those below average returns have already been realized and are now in the rear-view mirror. It's time to start raising your expectations for future returns.
So the worst historical 10-year return for stocks bought at current valuations of 5.8% beats money market funds yielding 1%, 10-year treasuries yielding 2.87% and very nearly beats intermediate investment grade corporate bonds yielding 6.11% (for VFICX). Meanwhile median returns for stocks over these 10 periods were close to 10% with the best 10-yr return reaching 18.6%.
SPX returns over the 10 year period immediately following a P/E-10 valuation of 11.8x:
Oct 1946 - Sep 1956 . . . . 18.61%
Sep 1953 - Aug 1963 . . . . 16.04%
Nov 1941 - Oct 1951 . . . . 15.97%
Jul 1974 - Jun 1984 . . . . . 11.97%
Dec 1916 - Nov 1926 . . . . . 9.77%
Apr 1938 - Mar 1948 . . . . . 9.52%
Aug 1934 - Jul 1944 . . . . . . 9.41%
Oct 1907 - Sep 1917 . . . . . 7.54%
Jun 1913 - May 1923 . . . . . 7.17%
Oct 1931 - Sep 1941 . . . . . 5.78%
Many of us have been planning on below average stock returns because of high valuations. Well, those below average returns have already been realized and are now in the rear-view mirror. It's time to start raising your expectations for future returns.