Here is a throwback interview to what Jack Bogle said about stock valuations relative to bond yields near the peak of the dotcom bubble:My conclusion:
All else being equal, higher valuations means lower returns. Assuming prior earnings are a good predictor of future earnings and valuations won't increase indefinitely, you're paying more for earnings so returns would be lower.
However, all else is rarely equal and there's lots of noise in the system.
Plus, as I'm fond of saying, if your model indicates the market is wrong (e.g., overvalued or top-heavy or whatever), the problem is much more likely to be with your model than with the market.
https://youtu.be/k6ra5POdsYg?si=Pzz7_cOUPXGczp6I&t=131
Statistics: Posted by watchnerd — Mon Jan 20, 2025 6:05 pm
