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Re: Any thoughts on expected returns on FTSE?

Posted: January 22nd, 2022, 8:44 am
by vand
Very difficult to give the answer that the OP wants to hear on this.

However, I am personally positioned quite significantly overweight in UK stocks, as I suspect quite a few here are due to their modest current valuations.

At the 1999 peak we were standing on a CAPE valuation north of 30. Today we are at half of that, despite much lower bond yields. It is quite possible that even today we are still living in the tail end of the effect of the dotcom valuations, which at the time, pretty much guaranteed sucky returns for the next 10 and even lower 20 years forward returns.

So, while we have no guarantees that the FTSE is going outperform other stock markets over the next 10-20, I do feel that it is going to do better that it’s own performance over the next couple of decades from today, simply because it’s starting from a more sensible level.

All other things being equal, people would have to be prepared to once again halve the amount they were willing to pay for UK stocks over 22 years (ie CAPE pe 8ish) in order for investment returns to remain on the same below par trajectory as they have been on since 1999.. while that is not impossible, I think it’s unlikely, and we will have better and more optimistic times ahead.

Re: Any thoughts on expected returns on FTSE?

Posted: January 22nd, 2022, 10:10 am
by GeoffF100
I have just valued my portfolio:

Cash + Fixed Interest 29.6%
Index Linked 10.2%
UK Equity 13.5%
Developed World Ex-UK Equity 42.0%
Emerging Market Equity 4.6%

That comes out to 22.5% UK equity and 77.5% overseas equity. EM a whisker underweight. The UK market has not been hit so hard in the recent fall, that allocation has risen as a result. Something similar happened in the summer and was quickly reversed. Nonetheless, for what it is worth (nothing) VUKE is ahead of VWRL over the last 12 months.

There has been a torrent of criticism of Vanguard's LifeStrategy's UK bias on the web recently. They usually seem to get it wrong, but this time may be different.

Re: Any thoughts on expected returns on FTSE?

Posted: January 26th, 2022, 9:17 am
by vand
I think a few of us here will are familar with John Kingham's excellent blog over the years.
Here's his latest take on FTSE100 valuation vs future return CAPE analysis:

https://www.ukdividendstocks.com/blog/w ... e-ftse-100