A recent article in Investing.com outlines some of the consequences of the governments’ economic stimulus activities.
Here is a summary of the article’s main points:
- “One consequence of spending too much borrowed money? Inflation,” the article argues, citing the surge in prices of everything from copper to lumber to livestock. “Sticker shock is happening around every corner.”
- On the other hand, the article notes, many seem unfazed by higher prices because both their investment accounts and home values “have never been higher.”
- But ignoring the “hyper-valuation in asset prices will likely come back to haunt,” the article warns, adding that 10-year stock returns based on “historically reliable metrics” like CAPE price-to-earnings will be “poor for hold-n-hopers.”
- Specifically, the article notes that the average of four such metrics shows a negative return of 0.75% over the next decade (without accounting for inflation).
- Some investors are “becoming wary of price agnostic growth stocks,” and shifting to “underappreciated” stocks with more favorable price-earnings, price-sales, and price-book valuations.
- The article reports that since Q4 of 2020, “value investing” has outperformed “growth investing.”