John Mauldin’s Prediction 10 Years Ago Comes True…

John Mauldin, renowned financial expert, New York Times best-selling author of The End Game, and pioneering online commentator, shared how his prediction 10 years ago now comes true…

The Prediction…

We will make the case that it is more useful to analyze stocks during secular bear markets in terms of value than in terms of price… These cycles generally take a generation to work their way through the investor public, have significant magnitudes of becoming undervalued and overvalued, and have significant implications for the way that investors should approach each of these periods.

 

Now…

Given the current and recent level of P/Es, the prospects are not encouraging for general market gains (the emphasis is on general or index funds) over the next two decades. This dismal outlook is not from some congenital bear perspective; it corresponds to the series of factors driving the current secular bear market.

Although P/E has declined over the past nine years, from 26 to near 20 (using the Shiller method), stock market valuation remains relatively high. Almost everything in chapters five and six of Bull’s Eye Investing remains true today. The market has chopped around with fairly typical volatility. P/E is in the lower end of the red zone rather than above it. Most importantly, currently high valuations portend low returns from here.

How low? That depends upon the outlook for deflation or higher inflation.

More from Business Insider:  http://www.businessinsider.com/mauldin-heres-what-i-said-10-years-agoand-heres-what-happened-2012-6

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