Last week Tony wrote about “The ’99 Rolloff“. He discussed 10-year returns, and the “lost decade” we just experienced. Although the last 10 years in the stock market have been disappointing, the next 10 years should be better for investors.
- The Dow is at 11,119
- With a trailing P/E of 25
- A dividend yield of 1.5%
- And a trailing 10-year return of 17.9%.
The second is March 2009:
- The Dow is at 7,609
- With a trailing P/E of 10 to 14
- A dividend yield of 3% to 4.4%
- And a trailing 10-year return of -0.4%.
In March of 2000 future return expectations were high, we saw record inflows into stock mutual funds and investor sentiment was euphoric.The next 10 years produced a dismal return of -0.4%Compare March of 2000 to the environment in March of 2009.Now the future return expectations are low, we have seen a massive level of redemptions in stock mutual funds and investor sentiment is that of despair.We do not yet know what the next 10 years will produce, but with a P/E that has been cut in half and a dividend yield that has been doubled, we are betting that the next 10 years will look much better than the last 10 years.~AdamSources: Thomson Financial, Lipper, Bloomberg, Davis Advisors