However, valuation is not a timing tool, and the odds of a creature as fickle as the stock market obliging our “rational” analysis are in truth fairly low…While valuations are blunt tools on a cyclical time horizon, they have the unusual property of becoming progressively finer and finer instruments as the time horizon is lengthened. The following study examines ten important valuation tools from the only perspective that should really count in evaluating such tools: Their ability to forecast longer-term stock market returns.
- Doug Ramsey, The Leuthold Group
