While political and economic trends matter, they are always changing. The price paid for an investment today discounts all earnings from that investment into perpetuity. Price paid is the most important factor for determining investment return. Last quarter, I shared a chart from Advisor Perspectives showing the S&P 500 at very high levels according to four long-term valuation methods. This chart bears repeating as the fourth quarter saw a significant expansion of valuations. What I find striking is that the rapid bear market last March still left stocks at among the richest valuations over the last twelve decades. The spike up off that (not) low level over the last several months has few historical corollaries.
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