U.S. Stocks Continue to Dominate ? What’s Next?

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Ron Surz

U.S. stocks earned 2.5% in the second quarter, bringing the year-to-date return up to a lofty 14%. By contrast, the EAFE index lost 1% in the quarter, bringing its year-to-date return down to 4%. In fact, as shown in the following graph, no other asset class comes even close to the return on U.S. stocks so far this year.

Will this dominance continue? Read on for my views. Bear in mind that U.S. stocks earned 16% last year, so the 18-month return through June was 32%.

Asset Class Returns 2013

Source: The Capital Spectator

Traditional valuation measures – price/earnings ratio and dividend yield – provide few clues to over- or under- valuation, because they are at the same levels they were five years ago, despite the fact that the market has earned 40% over those five years. Earnings and dividend payouts have increased in step with prices.

US Stock Market Yield
US Stock Market P/E

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