To me, the utility of valuation metrics is setting
expectations about future returns.
Not exact matches
In a nutshell, the normal run - of - the - mill
expectation for S&P 500 total
returns from present valuations is zero over the coming 10 years, but in the event of a secular low in the
future, total
returns from current valuations may turn out to be
about zero for the coming 20 years.
Businesses need to make sure their
expectations about investment
returns reflect the current and likely
future reality and reconfigure their investment plans accordingly.
Every security price effectively boils down to assumptions
about 1) the
expectation of
future growth rates, and 2) the expected long term
return.
When gathering information to identify the risk and
return characteristics of the many asset class indexes that belong in a diversified portfolio, the more quality long - term data you have, the more accurate and probable are your
expectations about future outcomes.
While Dutch investors have high
expectations for
future returns, they have become more pessimistic
about this in February due to recent pricing activity.