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Notes From the Fieldby Martin Weil

January 3, 2013

15 Years of Range Bound US Stocks

This chart from JP Morgan shows the clear range-bounds of the US equity market since 1997, a fact we have repeatedly stressed in our long-term outlook.  Money can be made (or lost) by catching these waves up or down, even if exact timing is impossible. Valuations, specifically (trailing, not forward) market PE ratios and Shiller’s PE 10, are our own guides to making judgments about where to add, or subtract, risk.

Fixed income has been doing the heavy lifting for most portfolios the last 10-plus years, as interest rates moved steadily downwards, and bond prices moved steadily higher.  At some point, this paradigm of range bound US equities and climbing bonds will change.  Far brighter minds than I have been predicting this, incorrectly now, for at least two years.

Chart pointer The Big Picture

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