Last October, my view was that the 600 level on the S&P 500 would represent deep undervaluation. Since then, however, it has become clear that we are observing a larger structural shift in the U.S. economy than seemed likely or necessary at that time.
Presently, assigning a somewhat increased likelihood of normal profit margins in the future (rather than the elevated ones of recent years) results in a 10-20% lowering of future valuation benchmarks. Investors will do particular harm to themselves if they gauge valuations on the basis of the elevated profit margins that we observed in 2007.
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Presently, assigning a somewhat increased likelihood of normal profit margins in the future (rather than the elevated ones of recent years) results in a 10-20% lowering of future valuation benchmarks. Investors will do particular harm to themselves if they gauge valuations on the basis of the elevated profit margins that we observed in 2007.
Read the complete commentery
