QUESTION: are US stocks too expensive?
ANSWER: Yes, is the conclusion of The Economist, and TurnerStreet.
Equity Risk Premium (“ERP) is a great indicator of whether a market is expensive. Even with the 0.2% fall in the S&P500 since the article was written a month ago, it isn’t enough to temp TurnerStreet back into equities. Additionally, annecdotally, we aren’t hearing great things about future earnings.
ACTION PLAN:
- Firstly, if you have never heard of ERP before reading this article or understand what it signifies, you are just punting securities, derivatives, etc, rather than investing. You should get a licensed investment manager.
- The most significant means to increasing your wealth is getting the asset allocation correct. For most people, that means knowing when to put money into equities and when to take it out. The first thing you need to ask your investment manager (or yourself if you take the DIY route) is what percentage of my portfolio should be equities.
- Once you establish how much to allocate to equities, then it is a question of which equities. For the DIY folks, that will most likely be an index. For professional investment managers, it will buying individual stocks.
- Contact TurnerStreet if you wish to buy our current asset allocation recommendation, and the list of the stocks TurnerStreet would buy for a typical wholesale client, or if you would like TurnerStreet to manage your equities and derivatives portfolio.