US equities are very dear right now according to most credible long-term valuation metrics. This points to disappointing returns over the coming years.
The same is not true of the UK’s FTSE 100, which offers decent value overall.
In this report, I explore various valuation metrics for the FTSE 100 and FTSE All-Share, and their effectiveness in predicting returns over time.
I find that current valuations are consistent with modestly positive inflation-adjusted total returns on a multi-year view.
The challenge remains how to square the implied positive outlook for UK equities with the unpromising outlook for the US.