Sentences with phrase «actual subsequent market returns»

On the measures we find most tightly correlated with actual subsequent market returns across history, the S&P 500 is now between 150 % and 170 % above valuation norms that have been approached or breached over the completion of every market cycle in history, including the most recent one.

Finally, the chart below shows the interaction between the raw Shiller P / E and the embedded profit margin in determining actual subsequent market returns.

We emphasize «historically reliable» because as in every bubble, there are numerous popular measures with quite poor correlation with actual subsequent market returns that Wall Street can offer to convince investors that valuations are just fine.

Only those who are historically uninformed believe that valuations have no relationship to subsequent returns, or place their faith in scraps of analytical debris like the «Fed Model» without examining their poor correlation with actual subsequent market returns.

On valuation measures most reliably correlated with actual subsequent market returns (a test that is never imposed on popular measures), current valuations now exceed 1929 levels.

Among the valuation measures having the strongest correlation with actual subsequent market returns, current levels are actually within 10 % of the March 2000 extreme.

That's fairly close to our own estimate of about 2.4 % based on a broad range of alternative measures that are highly correlated with actual subsequent market returns.

Our perspective is straightforward: on the basis of measures that have been reliably correlated with actual subsequent market returns in market cycles across a century of data, we estimate that the S&P 500 Index will be no higher a decade from now than it is today.

The strong one - to - one relationship between these estimates and actual subsequent market returns is presented in numerous prior weekly comments (see for example Too Little to Lock In).

Recent cycles provide no evidence of deterioration in the relationship between reliable valuation measures (particularly those that aren't highly sensitive to fluctuations in profit margins) and actual subsequent market returns.

Notably, the relationship between the Margin - Adjusted CAPE and actual subsequent market returns is more reliable than for the raw Shiller CAPE.

Indeed, even Robert Shiller's cyclically - adjusted P / E (CAPE) is much better correlated with actual subsequent market returns, across a century of market cycles, when we account for the profit margin embedded in the 10 - year average of earnings.

While our Margin - Adjusted CAPE has a very slightly lower correlation with actual subsequent market returns than our preferred measure (MarketCap / GVA), the available data history is longer.

This adjustment has historically been important, as adjusting for that embedded profit margin significantly improves the relationship between the CAPE and actual subsequent market returns (something we can demonstrate both with algebraic return estimates and regression models — see Margins, Multiples, and the Iron Law of Valuation).

Not exact matches

Actual results, including with respect to our targets and prospects, could differ materially due to a number of factors, including the risk that we may not obtain sufficient orders to achieve our targeted revenues; price competition in key markets; the risk that we or our channel partners are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders as we experience wide fluctuations in supply and demand; the risk that our commercial Lighting Products results will continue to suffer if new issues arise regarding issues related to product quality for this business; the risk that we may experience production difficulties that preclude us from shipping sufficient quantities to meet customer orders or that result in higher production costs and lower margins; our ability to lower costs; the risk that our results will suffer if we are unable to balance fluctuations in customer demand and capacity, including bringing on additional capacity on a timely basis to meet customer demand; the risk that longer manufacturing lead times may cause customers to fulfill their orders with a competitor's products instead; the risk that the economic and political uncertainty caused by the proposed tariffs by the United States on Chinese goods, and any corresponding Chinese tariffs in response, may negatively impact demand for our products; product mix; risks associated with the ramp - up of production of our new products, and our entry into new business channels different from those in which we have historically operated; the risk that customers do not maintain their favorable perception of our brand and products, resulting in lower demand for our products; the risk that our products fail to perform or fail to meet customer requirements or expectations, resulting in significant additional costs, including costs associated with warranty returns or the potential recall of our products; ongoing uncertainty in global economic conditions, infrastructure development or customer demand that could negatively affect product demand, collectability of receivables and other related matters as consumers and businesses may defer purchases or payments, or default on payments; risks resulting from the concentration of our business among few customers, including the risk that customers may reduce or cancel orders or fail to honor purchase commitments; the risk that we are not able to enter into acceptable contractual arrangements with the significant customers of the acquired Infineon RF Power business or otherwise not fully realize anticipated benefits of the transaction; the risk that retail customers may alter promotional pricing, increase promotion of a competitor's products over our products or reduce their inventory levels, all of which could negatively affect product demand; the risk that our investments may experience periods of significant stock price volatility causing us to recognize fair value losses on our investment; the risk posed by managing an increasingly complex supply chain that has the ability to supply a sufficient quantity of raw materials, subsystems and finished products with the required specifications and quality; the risk we may be required to record a significant charge to earnings if our goodwill or amortizable assets become impaired; risks relating to confidential information theft or misuse, including through cyber-attacks or cyber intrusion; our ability to complete development and commercialization of products under development, such as our pipeline of Wolfspeed products, improved LED chips, LED components, and LED lighting products risks related to our multi-year warranty periods for LED lighting products; risks associated with acquisitions, divestitures, joint ventures or investments generally; the rapid development of new technology and competing products that may impair demand or render our products obsolete; the potential lack of customer acceptance for our products; risks associated with ongoing litigation; and other factors discussed in our filings with the Securities and Exchange Commission (SEC), including our report on Form 10 - K for the fiscal year ended June 25, 2017, and subsequent reports filed with the SEC.

As we've noted previously, MarketCap / GVA has a correlation of about 92 % with actual subsequent 10 - year S&P 500 total returns, even in recent market cycles.

If one creates as scatter plot of the Shiller P / E versus actual subsequent 10 - year market returns, one gets a nice scatter, but a good deal of noise as well.

MarketCap / GVA is better correlated with actual subsequent S&P 500 total returns than price / forward earnings, the Fed Model, the Shiller P / E, price / book, price / dividend, Tobin's Q, market capitalization to GDP, price / revenue and every other valuation ratio we've developed or examined in market cycles across history.

As a result, starting valuations, on historically reliable measures, are 90 % correlated with actual subsequent 10 - year total market returns.

We find that in market cycles across history, this new measure is better correlated (92 %) with actual subsequent S&P 500 nominal total returns than even the S&P 500 price / revenue ratio and market capitalization / nominal GDP.

At this point, obscene equity valuations are already baked in the cake on valuation measures that are reliably correlated with actual subsequent stock market returns.

Among the valuation measures most tightly correlated across history with actual subsequent S&P 500 total returns, the ratio of market capitalization to corporate gross value added would now have to retreat by nearly 60 % simply to reach its pre-bubble average.

Last week, the U.S. equity market climbed to the steepest valuation level in history, based on the valuation measures most highly correlated with actual subsequent S&P 500 10 - 12 year total returns, across a century of market cycles.

While other historically reliable metrics carry a very similar message, Market Cap / GVA has the highest correlation with actual subsequent 10 - year S&P 500 total returns than any other valuation ratio we've examined across history.

Don't criticize historically reliable valuation measures that have maintained the same tight relationship with actual subsequent 10 - 12 year market returns that they've demonstrated across a century of history.

For example, our effort to carefully account for the impact of foreign revenues, and to create an apples - to - apples measure of general equity valuation led us to introduce MarketCap / GVA, which is better correlated with actual subsequent 10 - 12 year market returns than any of scores of measures we've studied.

On the basis of the most reliable valuation measures we identify (those most tightly correlated with actual subsequent 10 - 12 year S&P 500 total returns), current market valuations stand about 140 - 165 % above historical norms.

The chart below shows this relationship using market capitalization to corporate gross value added (blue, on an inverted log scale) versus actual subsequent 12 - year S&P 500 nominal total returns (red).

Here's a chart from a recent Weekly Market Comment showing the projections for 10 - year annual total returns on the S&P 500 versus actual subsequent 10 - year total returns:

On the basis of valuation measures most tightly related to actual subsequent long - term market returns, we also estimate that the S&P 500 is likely to be lower 12 years from now, compared with current levels, though dividend income may push the total return just over zero on that horizon.

While other historically reliable metrics carry a very similar message, Market Cap / GVA has the highest correlation with actual subsequent 10 - year S&P 500 total returns than any other valuation ratio we've examined across history.