Bonds over stocks?

Bloomberg’s Gadfly section has a good article on Jeremy Siegel and his views on market valuations.

Definitely worth a read, as it takes a look at the CAPE Ratio and the impact of GAAP reporting vs using operating earnings.

But what I found most surprising was the below chart. I don’t find the case for holding bonds today compelling, but I didn’t know they had until very recently been outperforming US stocks since 2000.

Source: Bloomberg

Obviously the start and end date of any indexed chart can profoundly change the “story”, but I found the chart interesting nonetheless. 

The market must go down from here, right?

There are some crazy valuations out there at the moment, and I’m an unashamed a member of the “this can’t last” crowd.

However, I also know the chances of me timing the correction and subsequent recovery are slim-to-none.

So I’ve been building a diversified portfolio, which will hopefully provide both exposure to future growth and some protection if the music stops.

Jeffrey Kleintop from Charles Schwab wrote some commentary a few weeks ago which I found comforting.

His key takeaways were: Continue reading

Remember stock analysts are nearly always too bullish!

As the new year approaches, the financial press will be full of stories such as:

  • “Top 10 stock picks for 2017”
  • “Investment experts say 2017 will…”

Which brings to mind the McKinsey article from 2010 “Equity analysts: Still too bullish”. In essence they found that equity analysts nearly always over-estimate earnings growth. However capital markets are more constrained in how they value companies. Actual P/E ratios are typically substantially lower than those implied by analysts forecasts.  Continue reading