I imagined the market timing police would show up.
If you do your research (the guys over at starcapital do a good job), you will notice there is a very strong correlation between valuations and forward 10-15 year returns.
This does NOT mean that the market is going to tank tomorrow, or next week or next year: nobody knows for sure and those who say they know are either idiots or liars (or both).
This though does mean that, historically, there is now a very high chance of the US equity market doing worse than average, in the next 10-15 years.
Please note:
1- "very high chance" doesn't mean "for sure"
2- the 10-15 year timeframe (not really a "timing" thing
3- there is no "crash" prediction. The lower returns could also come with a lateral move.
1-Why shouldn't the "market timing" police show up?
2- The main problem with anyone who says "the market will do something, someday" is that they aren't giving you information you can actually use. If Gross or anyone else saying the market is going to tank or simply not do as well in 10-15 years is right, what are you going to change tomorrow? If it happens he can say he was right all along even if it happens in 9 years or 16 years instead of 10-15.
3- Based on his words and your probabilities (wherever those are coming from)
4- are you going to change your portfolio and sit on his bonds for 15 years hoping he's right? If he's wrong are you going to still sing his praises if at the end you realize you missed out on a decade of stock growth because it was probably going to happen?
1- because I wasn't advocating for market timing at all.
2- I am giving you information you can use: as I said before, you should lower your expectations because probably you won't see the same gains in the next 10-15 years that we've historically seen
3- probabilities are coming from history. Just looking back at when valuations were at similar levels as today and what happened in the next 10-15 years.
Go look on starcapital, or Vanguard, they did studies on valuations and forward returns.
4- no I'm not going to change my asset allocation significantly. I'm not selling anything as high valuations can go even higher.
I'm just lowering my expectations on future returns on USA stocks.
I have made a slight tilt to european and emerging markets equities since beginning of 2016.