Why using valuation as a timing tool is a 'difficult proposition'
Jeremy Bryan, Gradient Investments senior portfolio manager joins Wealth! to break down why using valuation as a timing tool is a "difficult proposition." "In the short term, valuation doesn't tell you much about market trends. It really doesn't. Expensive can always get more expensive, and cheap can always get cheaper," Bryan tells Yahoo Finance. However, he believes that valuation is better used as a long-term tool. He explains, "When you're expensive like we are right now, really what you should expect is sub-average returns. If you're 8-10% over a long-term average when you're paying more for the market, you should probably expect a little bit less than that. And in the same way, it goes the other way. When the markets are cheap, you should probably expect a little bit more over the long term." Bryan continues, "If you're looking at valuation and saying, 'Well, valuations are expensive. There's a 20% correction coming,' that's just a really difficult proposition because markets in the short term tend to be trend following for the most, and you need something to disrupt that trend. And valuation just really isn't a good timing tool for that purpose." To watch more expert insights and analysis on the latest market action, check out more Wealth here. This post was written by Melanie Riehl
