Summary
- The persistent rise in US equities is helping promote a view that the relationships of old for stocks and traditional measures for value-oriented investing strategies no longer apply.
- A variation on the CAPE Ratio that adjusts the metric using real yields for an arguably superior modeling exercise implies that investors should dramatically reduce expectations for S&P 500 returns for the years ahead.
- A cautious outlook for stocks is an incentive for a calculated-risk decision that hedges allocations is US shares, especially in portfolios that hold American equities at substantially above-target weights.
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By James Picerno
The belief that “it’s different this time” often leads to trouble in investing, but so far, the US stock market continues to defy gravity, based on several metrics that attempt to estimate valuation for American shares. The persistent rise in US
