You might find useful a couple of articles I wrote this week, especially the first one. I have long had a fascination with valuing indices like the FTSE 100. The most common approach today is to use some variation on PE10 (price to 10 year average earnings) or CAPE (the same, but inflation adjusted).
The articles below give some idea of how the value of CAPE has changed for the FTSE 100 over the past 25 years, and what it means for a 'central projection' of the FTSE 100 in the coming decade.
An alternative to stock market forecasts
When the Bank of England first began publishing their "fan charts" I immediately became a fan of the fan charts. They bring to life the uncertainty which is implicit in most forecasts. Sadly, there is a lack of similar visual tools for stock market investors... Read the rest of this article >>
My FTSE 100 forecast for the next 7 years (published on BullBearings.co.uk)
We've had a massively bullish start to the year, and most of the forecasts that I've seen for 2013 have the 100 share index up at something like 6,200 to 6,500 by the time Santa returns. All of those forecasts are very interesting, but ultimately they are nothing more than simple guesses... Read the rest of this article >>
As you can see, I think it's important to understand the current valuation of the market and what it can mean for future returns. However, investors are misleading themselves if they think they can predict the future with any great accuracy.
Have a good weekend,
John Kingham
Editor, UK Value Investor
Email: john@ukvalueinvestor.com
PS. Find out more about my simple strategy for dividend growth and capital gains - Find out more >>
Note: I provide information for investors who can make their own decisions. I do not provide financial advice. You should seek a professional advisor if you think you need one. Please remember that the value of investments and their income can fall as well as rise.
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