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Investing Newsletter – January 2018

  • 2017 was an exceptional year for globally diversified investors.

  • The US Shiller CAPE 10 year PE ratio is reaching historic levels indicating that the US stock market may be overvalued.

  • Vanguard’s US fair-value CAPE measurement that adjusts for inflation and interest rates indicates a less overvalued US market.

  • International Developed and Emerging Market Shiller CAPE 10 year PE ratios are less elevated which may indicate higher future long term returns for these markets versus US markets.

  • Valuation measurements such as the Shiller CAPE 10 PE ratio tell us nothing about when to expect the next market correction or bear market.

  • Rational investors should expect lower returns in the foreseeable future.

  • After significant gains in 2017, investors should consider rebalancing their portfolios especially if they are concerned about elevated stock market valuations.

Investing Newsletter - Jan 2018