- The long-term mean of the Shiller Cyclically Adjusted Price to Earnings Ratio P/E10 incorporates time-inconsistent data, causing substantial underprediction of realized stock returns in recent decades.
- Better prediction of market direction and returns can be achieved by using a 35-year moving-average of P/E10, instead of its long-term mean.
- Stocks seem only overvalued after P/E10 becomes greater than its 35-year moving average plus 7.5 added to it, with major market declines starting one to five years thereafter.
- An analysis shows that whenever P/E10 rose from below to above its 35-year moving average significant ten-year gains for stocks followed.
- Both the historic market trend, and the current level of the Shiller CAPE P/E10, suggest probable real market gains of about 20% to 28% to the end of 2020.
Blog Archives
Estimating Market Direction and Long-Term Returns with a 35-Year Moving Average of Robert Shiller’s P/E10
No Recession Is Signaled By iM’s Business Cycle Index: Update July 9, 2015
Knowing when the U.S. Economy is heading for recession is paramount for successful investment decisions. Our weekly Business Cycle Index (BCI) would have provided early reliably warnings for the past seven recessions.
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The Unemployment Rate is Not Signaling a Recession: Update July 3, 2015
A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and ends of recessions. The unemployment rate model (article link), updated with the June figure of 5.3%, does not signal a recession now.
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No Recession Is Signaled By iM’s Business Cycle Index: Update July 2, 2015
Knowing when the U.S. Economy is heading for recession is paramount for successful investment decisions. Our weekly Business Cycle Index (BCI) would have provided early reliably warnings for the past seven recessions.
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Minimum Volatility Stocks: Does Frequent Trading Result in Better Returns?
- Two trading models are compared which select periodically 8 large-cap minimum volatility stocks from the Health Care, Consumer Staples, and Utilities sectors of the S&P 500.
- The models only differ from each other with regard to hedging, and sell rules which extend stock holding periods for one model to longer than one year.
- Backtests over a 15.5 year period show similar average annualized returns of about 36% for both models, but the number of realized trades differ, 148 versus 618.
- The analysis shows that in this case, and perhaps in general, frequently trading minimum volatility stocks does not necessarily produce better returns than for one year minimum holding periods.
Best8(S&P500 Min-Volatility)-Tax Efficient Large-Cap Portfolio Management System With Minimum Volatility Stocks of the S&P 500
- This model invests periodically in eight highly liquid large-cap stocks selected from those considered to be minimum volatility stocks of S&P 500 Index.
- Most stock positions are held for longer than one year resulting in a Tax Efficiency ratio of 81.4%.
- When adverse stock market conditions exist the model shorts the 3x leveraged Ultrapro S&P500 ETF (UPRO) – hedge/current holding ratio= 45%.
- It produced a simulated average annual return of about 36% from Jan-2000 to end of June-2015.
No Recession Is Signaled By iM’s Business Cycle Index: Update June 25, 2015
Knowing when the U.S. Economy is heading for recession is paramount for successful investment decisions. Our weekly Business Cycle Index (BCI) would have provided early reliably warnings for the past seven recessions.
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Minimum Volatility Stocks: 1 year Out-Of-Sample Performance of iM’s Best12(USMV) Models
- Portfolios of the 12 top ranked stocks of the iShares MSCI USA Minimum Volatility ETF provided much higher 1-year returns than the ETF.
- For the period 6/30/14 to 6/18/15, our Best12(USMV)Q3-Investor, a 1-year buy&hold portfolio, returned 26.0%,
- The Best12(USMV)-Trader, re-balanced every 2 weeks, returned 29.3%,
- iShares MSCI USA Minimum Volatility ETF USMV returned 13.3% for the same period..
No Recession Is Signaled By iM’s Business Cycle Index: Update June 18, 2015
Knowing when the U.S. Economy is heading for recession is paramount for successful investment decisions. Our weekly Business Cycle Index (BCI) would have provided early reliably warnings for the past seven recessions.
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No Recession Is Signaled By iM’s Business Cycle Index: Update June 11, 2015
Knowing when the U.S. Economy is heading for recession is paramount for successful investment decisions. Our weekly Business Cycle Index (BCI) would have provided early reliably warnings for the past seven recessions.
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With reference to Section 202(a)(11)(D) of the Investment Advisers Act:
We are Engineers and not Investment Advisers,
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