Buffett, Shiller, Bogle & Tobin: Valuations, Forward Returns & Winning The Long-Game

What a difference just a couple of months can make.

Since the financial crisis, there has been much commentary written about the low forward returns on stocks over the subsequent 10-year period from high valuation levels. The chart below shows the forward 10-year returns from previously valuation levels.

However, just a couple of months later, those forward returns have exploded higher.

What changed?

Nothing really. It is simply the function to the massive decline in 2008 being removed from the 10-year average.

However, while the forward returns have spiked in recent months, this has been due to a market that has been fueled higher by massive amounts of global monetary stimulus rather than a reversion in valuations that fostered an organic growth in returns.