Based on Shiller PE ratios, S&P500 valuations are back in their top historic quintile, historically this is a strong signal of poor long-term returns. Although Europe looks less egregiously expensive the investment case is far from compelling. So what do we do? The simple answer is nothing. The potential rewards being offered for the risks entailed in being aggressively overweight equities (or even just overweight) seem scant. But even when the macro case isn’t interesting, there’s usually something going on at a micro level.
And some nice charts for better visualization of dry words. Click on charts to enlarge, courtesy of Societe Generale.