Re: Any thoughts on expected returns on FTSE?
Posted: January 22nd, 2022, 8:44 am
Very difficult to give the answer that the OP wants to hear on this.
However, I am personally positioned quite significantly overweight in UK stocks, as I suspect quite a few here are due to their modest current valuations.
At the 1999 peak we were standing on a CAPE valuation north of 30. Today we are at half of that, despite much lower bond yields. It is quite possible that even today we are still living in the tail end of the effect of the dotcom valuations, which at the time, pretty much guaranteed sucky returns for the next 10 and even lower 20 years forward returns.
So, while we have no guarantees that the FTSE is going outperform other stock markets over the next 10-20, I do feel that it is going to do better that it’s own performance over the next couple of decades from today, simply because it’s starting from a more sensible level.
All other things being equal, people would have to be prepared to once again halve the amount they were willing to pay for UK stocks over 22 years (ie CAPE pe 8ish) in order for investment returns to remain on the same below par trajectory as they have been on since 1999.. while that is not impossible, I think it’s unlikely, and we will have better and more optimistic times ahead.
However, I am personally positioned quite significantly overweight in UK stocks, as I suspect quite a few here are due to their modest current valuations.
At the 1999 peak we were standing on a CAPE valuation north of 30. Today we are at half of that, despite much lower bond yields. It is quite possible that even today we are still living in the tail end of the effect of the dotcom valuations, which at the time, pretty much guaranteed sucky returns for the next 10 and even lower 20 years forward returns.
So, while we have no guarantees that the FTSE is going outperform other stock markets over the next 10-20, I do feel that it is going to do better that it’s own performance over the next couple of decades from today, simply because it’s starting from a more sensible level.
All other things being equal, people would have to be prepared to once again halve the amount they were willing to pay for UK stocks over 22 years (ie CAPE pe 8ish) in order for investment returns to remain on the same below par trajectory as they have been on since 1999.. while that is not impossible, I think it’s unlikely, and we will have better and more optimistic times ahead.