Warning: High Stock Market Valuations Could Lead to Disappointing Returns
The market value of stocks compared to the economy can predict long-term stock returns. When this ratio is low, stocks tend to perform well over the next 10 years. But when the ratio is high, returns are usually disappointing. Currently, the ratio suggests that high returns seen since 2009 may not continue. While U.S. stocks are still a good investment, future returns are likely to be moderate or even negative.