OP states that "Shiller PE seems mostly useless." If you don't act on the data, I would agree with that statement.I don’t believe you need to act on the data, but you certainly can. Bogle did by shifting more into bonds.
I don’t believe anyone will disagree that there is correlation between CAPE and market returns. My question to you is, how do you or I use this data?
My thought has always been that the market will give what it gives and I adjust to current reality and not to predictions of a possible future.
What do you think? How do you use CAPE?
You basically need to look at the entire investable universe and compare them on a relative valuation basis for your own personal long term AA strategy and what returns you expect to achieve for a given level of risk.
Most of the time, no changes are needed, but sometimes certain markets diverge greatly and that presents opportunities for adjustments
If one does act on that data, then how? What Shiller PE do I adjust my AA away from those equities? When do I go from static buy and hold to market timing?
I will admit, that when the market is down such as during COVID, I increased my equities allocation. Same went for 2022 when the market went down again. Gradually overtime, I get back to my desired AA. I will also admit that I market timed without using any ratios. In March 2020 it was time to rebalance and I over rebalanced. In 2022 I never hit rebalancing bands. All new contributions just went into equities instead of bonds. Today, all dividends, interest and contributions are now going to bonds to get back to my 70/30 AA.
Statistics: Posted by EnjoyIt — Thu Feb 08, 2024 12:31 pm — Replies 82 — Views 4193
