Louis, is this what you are looking for?
<<Consider the past 40 years: Dividend yield plus earnings growth came to a total of 11.2% per year. The actual return of the stock market came to an identical 11.2%. >>
This excerpt is from an article by John Bogle, and although long, I highly recommend it and think it is well worth reading for those interested in market fundamentals, and a common sensical viewpoint.
Noparking, this article does a good job of explaining the importance of starting P/E in long-term investing by comparing two 20 year periods ('61-'81 corporate earnings growth and dividends=12.1%, yet market return=7.5%. '81-'01 corporate growth and dividends=10.3%, yet market return=15.2%. Why? P/E went from 22 to 8 from '61 to '81, and from 8 back to 20 from '81-'01, after topping out at 32 in 2000. So, though corporate growth rate was greater then than in our new era, the market return was about 1/2.) As Exeric2 pointed out, at this point in the economic cycle you would have expected those P/Es to have bottomed by now, but I'm not betting on that.
vanguard.com
JP |
