There’s no question that Fed-induced speculation encouraged investors to chase extreme valuations, and to accept low returns on every class of investments. Unfortunately, Fed policy does not change the arithmetic that links valuations with subsequent returns. By our estimates, the S&P 500 is likely to lag Treasury bonds, and even Treasury bills, for more than a decade. Now comes the hard part.
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Now Comes the Hard Part
There’s no question that Fed-induced speculation encouraged investors to chase extreme valuations, and to accept low returns on every class of investments. Unfortunately, Fed policy does not change the arithmetic that links valuations with subsequent returns. By our estimates, the S&P 500 is likely to lag Treasury bonds, and even Treasury bills, for more than a decade. Now comes the hard part.