Many readers have gotten really good value from yesterday’s slide deck by JP Morgan. But the aspect that leaves investors concerned was the 5-year subsequent stock market performance after we have a rather high price-earnings read. Some have asked how I would invest in this climate, and the truth is, 21.5 times PE is above average but you can see that in some instances, subsequent 1-year returns can be 20%. Usually, low 5-year annualized returns mean that somewhere in the next 5 years, you are going to get a nasty one where it takes the returns down to 0% a year or slightly below that. I have seen enough of these data at work. It can get rather demoralizing. The danger for those who are perhaps less sophisticated is that they treat this as a be-all-end-all. We can always frame things differently.

1. While we do not know which factor premiums will show up

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