Peter Explains It All in the Most Important Read of the Decade
Peter Explains It All in the Most Important Read of the Decade. “U.S. stocks are expensive relative to both their historical valuations and current
global valuations. In fact, U.S. CAPE ratios have only been higher on two other occasions, in 1929, before the Crash that brought on the Great Depression, and in 1999, in the months leading up to the Dotcom Crash.
And while we know now, with the benefit of hindsight, that the optimisms that fueled spikes in 1929 and 1999 were largely illusory, at least they made some sense at the time. In the late 1920s America was awash in a tide of prosperity, global expansion, and cultural exuberance. In the late 1990s, the fall of the Soviet Union, years of above-trend growth, and the emergence of an entire new technology sector bred a sense of possibility and invincibility.
But where is the optimism now? With debt running out of control, political polarization running high, a raft of potential new corporate taxes and quasi-socialist policies percolating in the halls of Congress, no serious economist could think that the economy is poised for organic growth. America is no longer the economic power that emerged after the First World War or after the Cold War. Instead, as we have seen, all hope is on new stimulus. But the new forms of stimulus are more likely to create inflation than real growth.
We believe that in the coming decade if the dollar were to decline like it did beginning in 2002, the changing currency values may lead to investment results more in line with the first decade of this century than the second. We are preparing our clients for this scenario.”
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