Ghost of Igloi wrote:
Valuation gives you an indication when the cycle will end. Look at it this way, at age 65 if you have accumulated your retirement portfolio, you have more to lose than to gain. The greater risk of guessing is in the FA plan, which assumes the next year will be like the last 130 years.
Of course, if you are 30 and you have $10,000 in savings, little of this matters.
I found this article by Vanguard Mutual Funds very informative. They seem to call into question the ability to use valuation as indicative of performance cycles. And i quote:
"We’ve shown that forecasting stock returns is a
difficult endeavor, and essentially impossible in the
short term. Even over longer time horizons, many
metrics and rough “rules of thumb” commonly
assumed to have predictive ability have had little
or no power in explaining the long-run equity return
over inflation"
Full article "Forecasting stock returns: What signals matter, and what do they say now?" :
https://personal.vanguard.com/pdf/s338.pdf