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iM Update – November 4, 2022
Posted in pmp free update
Expect Further Losses For Stocks but 10-Year Forward Returns Look Better: Update November 2022
- The best fit line and prediction band were re-calculated from Jan-1871 to Sep-2022. This added over 10 years of data after July-2012, the end date of the previous regression analysis.
- The average of S&P 500 for Oct-2022 was 3,726 (20% down from Dec-2021 average of 4,675) and is 207 points higher than the corresponding re-calibrated long-term trend value of 3,519.
- For the S&P 500 to reach the long-trend would entail only a 6% decline from the October average value, indicating that the S&P 500 is not significantly overvalued anymore.
- The Shiller CAPE-ratio is at 27.2, only 6% higher than its 35-year moving average (MA35), currently at 25.7, forecasting a relatively high 10-year annualized real return of about 7.5%.
- However, rising inflation with a falling CAPE-MA35 ratio, similar to what occurred in the period 1964-1973, implies very low or negative 10-year forward annualized real returns.
With reference to Section 202(a)(11)(D) of the Investment Advisers Act:
We are Engineers and not Investment Advisers,
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