“The current extreme in margin debt offers one way to gauge the speculative exuberance of investors. – John Hussman” Thinking about this chart from John Hussman, showing margin debt relative to GDP spiking to all-time highs, with previous such instances seeming to foreshadow major market downturns: It’s very easy to look at a chart like […]
Market Valuation
Is Goldman Sachs’ 3% Annual Return Forecast Based on Bad Data?
This paper from Goldman Sachs made big headlines a couple of months back for forecasting an abysmal 3% nominal annual return for US stocks in the coming decade. For anyone who didn’t read GS’s analysis, the biggest contributor to that poor return was “market concentration”, or the market cap of the largest stocks relative to the […]
New Feature: 10-Year Stock Market Return Forecast
We are often asked about stock market valuation models such as Shiller’s CAPE Ratio and the Buffett Indicator. These models predict long-term returns, usually forecasting the next 10 years. Our recent analysis of one such valuation model, the Aggregate Investor Allocation to Equities, motivated us to take our our own deep dive into the subject. […]
Our Take on “The Single Greatest Predictor of Future Stock Market Returns”
Readers have asked for our take on “the single greatest predictor of future stock market returns”, aka the Aggregate Investor Allocation to Equities. This indicator was first shared by Philosophical Economics back in 2013, and recently resurrected by Portfolio Optimizer (two excellent sites you should be following). A very brief primer: The Aggregate Investor Allocation […]