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Long-Term Home Prices

The last three decades recorded remarkable returns in home prices within most OECD member countries. Nowadays, institutional and retail investors perceive housing as a safe long-term investment. However, they will be most likely disappointed over the next few decades. This write-up discusses long-term evidence that academic research revealed on home prices. It will conclude with an assessment of real estate ...
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This Time Is Unlikely Different

Those who read our latest write-ups know that we laid out a bearish case for equities. The two principal reasons for that outlook were extremely expensive valuations and evidence of excessive speculation among investors. Both elements have typically preceded large corrections and even bubbles historically. Nonetheless, we concluded that technicals were intact and likely leading the S&P 500 above 3,884 before the ...
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Calm Before The Stock Storm

The cyclically adjusted price-earnings ratio (CAPE) is among the most potent academic finance concepts. It estimated long-term equity returns reliably. 150 years of equity market history is plotted in the first chart below. The broad-based US equity market is currently priced at about a 34 CAPE, which coincided with a negative return during the subsequent ten years. (Source: The ...
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Collecting Pennies In Front Of A Bulldozer

2020 is almost over and it will take its unique place in history. Imagine that someone told you a year ago that a global pandemic hits the world and leads to the most severe economic downturn since the Great Depression. Yet, equities trade at all-time highs near year-end. You would have probably questioned that person’s sanity. The market path did ...
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The Santa Rally Approaches A Halftime Break

Stocks continue to behave unintuitively for most investors as a bubble inflates. We’ve shown various valuation metrics in the past few write-ups here. Fundamentals have not changed as valuations remain stretched and not sustainable. Nonetheless, we made a case to buy equities short-term. The environment remains probably constructive for equities until year-end. However, the risk/reward relationship is not as good as ...
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Ride That Wave

Investors feared adverse effects on the global recovery after the coronavirus situation escalated in Europe once again. Consequently, European equities posted their worst performance in three months and dragged the US market lower. Nonetheless, the situation led to an opportunity to buy the dip just as positive seasonality arrives. The Upside Trend Is Intact The S&P 500 remains overvalued and ...
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