Market Oddities & Future Returns

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The S&P 500. A collection of companies. People betting on other people. It’s averaged 10% a year, historically. Not bad, if you don’t think about it too hard. The last decade? Considerably better. We got lucky, maybe. Or maybe it was just… time. So it goes.

Something unusual has happened. Something that’s only happened once before since 1871. The market is, let’s say, enthusiastic. Should we be worried about 2026 and beyond? Well, worrying is a human pastime. Doesn’t change much, though.

High Prices & Future Disappointments

Smart investors look at individual stocks. They ask: is this thing worth what I’m paying for it? It’s a good question. We should do the same with the whole market. The CAPE ratio—that’s Cyclically Adjusted Price-to-Earnings, for those keeping score—is currently at 40.9. It was about that high during the dot-com bubble. Remember that? Lots of enthusiasm. Then… not so much. High valuations don’t guarantee anything, of course. But they do suggest that future returns might not match the past.

The numbers suggest a possibility of negative returns over the next decade. Just a possibility. But numbers have a way of being right, eventually. It’s a cold comfort, I know.

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Optimism, With a Pinch of Salt

When things look bleak, people tend to hold onto their money. Understandable. But even in a gloomy outlook, investing still makes sense. The past 10 years were exceptional. Don’t expect a repeat. Fifteen or sixteen percent? That was a gift. A fleeting, improbable gift. But a good long-term horizon—decades, if you have them—still offers a reasonable chance of success. It’s not a guarantee, naturally. Nothing is.

Be an optimist, if you can. It encourages saving and investing. Your future, such as it is, depends on it. It’s a small thing, really. A tiny act of defiance against the inevitable. So it goes. And who are we to argue with the universe?

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2026-01-31 19:42