Up, down, sideways,… what to expect?

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Markets are going down, up a little, sideways, … Is it surprising?  Not really and it does not preclude obtaining a good performance.

These past months, I frequently mentioned that big companies are generally not cheap.  Here is another interesting statistic:

Following a recession, price/earning ratios (P/E) are generally low because stock prices are depressed.  It is not the case now.  Big cap indices such as the S&P 500 have a P/E of approximately 22 (around 26 if you count the write-offs) … historically speaking, this is expensive.  Since 1920, if we look at the median (the middle) of each time the P/E was expensive following a recession, the average return for the big caps was 4.4% per year for the following 10 years.

Conclusion:  If one wishes to obtain a good performance, a disciplined approach is essential in building a portfolio.  Stock selection takes on a lot of importance especially when investing in a large company.

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  • Claret

    Claret Asset Management specializes in offering portfolio management services to high net worth clients. We are completely independent and free of conflicts of interest. Claret was founded in 1996 with the objective of answering the growing needs of private investors.

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