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Science? Yeah, Right

Jonathan Clements  |  Sep 30, 2017

I HEAR SO MANY compelling investment arguments. That U.S. stocks are destined to generate lackluster returns because valuations are so rich. That there’s no need to own foreign stocks because you get enough international exposure with U.S. multinationals. That interest rates have nowhere to go but up.
And yet U.S. stocks keep clocking gains, U.S. and foreign shares often generate radically different annual results, and interest rates show no signs of heading significantly higher.

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Past Perfect

Jonathan Clements  |  Jul 1, 2017

OVER THE 50 YEARS through year-end 2016, the per-share profits of the S&P 500 companies rose a cumulative 1,604%, equal to 5.8% a year, while inflation ran at 4.1%. If share prices had climbed in lockstep with corporate earnings, $1,000 invested at year-end 1966 would have been worth some $17,000 at year-end 2016. On top of that price appreciation, investors would also have collected dividends.
But in fact, over this 50-year stretch, investors fared far better.

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Taking Precautions

Jonathan Clements  |  Jun 24, 2017

INVESTMENT contrarians are having a good year—but not a great one. In 2016, U.S. stocks outpaced foreign shares, smaller companies outperformed their bigger brethren and value stocks beat growth stocks. In 2017, all those roles have been reversed, with foreign shares, big-cap stocks and growth companies topping the performance charts.
For those of us who like to see the mighty fall and the downtrodden lifted up, this has been quite satisfying, except for one small issue: Even as the stock market’s leadership has changed,

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Unanswerable

Jonathan Clements  |  Mar 8, 2017

“IF YOU DON’T MIND, I have a question for you,” wrote a former colleague. “Should folks be getting out of the stock market? This Trump bump seems like such a crazy bubble.”
Lots of folks are asking this question. How to respond? I fall back on three key points.
First, I believe U.S. stocks are expensive, while foreign stocks are cheap. But that doesn’t tell you anything about short-term performance and only a modest amount about long-run results.

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