Triangle - Improving Stock Returns Forecasts: a "Fair Value" CAPE Approach
Improving Stock Returns Forecasts: a "Fair-Value" CAPE Approach
Are U.S. stock prices overvalued? U.S. stock valuations are nearing historical highs, but some investors are wondering whether this bull market could become a bubble. More importantly, they’re wondering what to do if that’s the case.
This presentation examines U.S. stock prices from an over-/under-valuation perspective using Vanguard’s fair-value cyclically adjusted price earnings (CAPE) approach that was recently published in the Journal of Portfolio Management.*
The presentation will highlight:
• Why comparison against long-term average valuations paints an incomplete picture regarding U.S. stocks.
• A better valuation metric benchmark and Vanguard’s model that improves stock return forecasts recently published in the Journal of Portfolio Management.*
• Vanguard’s market outlook, including for U.S. stocks.
• Actionable insights on how to respond to elevated stock prices.
Speaker Bio: Harshdeep Ahluwalia, Senior Investment Strategist
Investment Strategy Group
Harshdeep Ahluwalia is a senior investment strategist in Vanguard Investment Strategy Group, which is responsible for developing investment methodology and publishes proprietary research on a variety of investment, economic, and portfolio management topics.
Currently, Mr. Ahluwalia leads a team of quantitative analysts that research and develop proprietary models for capital market return projections (the Vanguard Capital Markets Model®) and multi-asset portfolio allocation (the Vanguard Asset Allocation Model). His team also pioneered a quantitative glide path construction model (the Vanguard Life-Cycle Investing Model) for investors saving for retirement. He has published widely and is a frequently requested speaker on the topics of market outlook, forecasting, asset allocation, and glide-path construction.
Mr. Ahluwalia earned a B.E. in mechanical engineering from Osmania University, an M.S. in mechanical engineering from North Carolina State University, and an M.S. in financial engineering from Temple University.