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