Valuation can never help us with stock-market timing. An overpriced market can always become more overpriced in the short term. So the measure gives no insight on how the market will get its 4.5% annualized return between now and 2030. It could be through years of slow growth, or it could take a 30% or 40% plunge followed by a buying opportunity and a recovery.
But with shares now trading at a record multiple of sales, and profit margins beginning to come down from a lofty level, their prediction of much slower stock-market growth over the medium term is hard to refute.
This article was provided by Bloomberg News.