No. of Recommendations: 3
A monster 10 years for US stocks has showered money on the buy-and-hold faithful and made virtually every other asset class an also-ran.
So great have the gains been that some fairly simple math shows that however roaring the 2020s turn out to be, reprising the last decade’s bounty will take near-miracle expansions in earnings and valuations.
By definition, one of three things has to happen for equities to appreciate: earnings must grow, valuations expand or dividends climb. Brooks’s point is simple: replicating the gains of the last 10 years requires massive increases in the first two components. Even if real earnings go up by a relatively generous 4.5% annually over the next decade, a repeat performance for the S&P 500 would take the cyclical P/E to a heretofore unheard of 55, he calculates.
Michael O’Rourke, chief market strategist at JonesTrading, notes there’s an additional complicating factor: The days of near-zero benchmark interest rates are over.
https://archive.md/eHBcF 