Investing Newsletter – Jan 2018

• 2017 was an exceptional year for globally diversified investors.

• The US Shiller CAPE 10 year PE ratio is reaching historic levels indicating that the US stock market may be overvalued.

• Vanguard’s US fair-value CAPE measurement that adjusts for inflation and interest rates indicates a less overvalued US market.

• International Developed and Emerging Market Shiller CAPE 10 year PE ratios are less elevated which may indicate higher future long term returns for these markets versus US markets.

• Valuation measurements such as the Shiller CAPE 10 PE ratio tell us nothing about when to expect the next market correction or bear market.

• Rational investors should expect lower returns in the foreseeable future.

• After significant gains in 2017, investors should consider rebalancing their portfolios especially if they are concerned about elevated stock market valuations.