Share This Episode
MoneyWise Rob West and Steve Moore Logo

Measuring the Market’s Valuation

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
September 19, 2023 5:21 pm

Measuring the Market’s Valuation

MoneyWise / Rob West and Steve Moore

On-Demand Podcasts NEW!

This broadcaster has 903 podcast archives available on-demand.

Broadcaster's Links

Keep up-to-date with this broadcaster on social media and their website.

September 19, 2023 5:21 pm

If you own stocks and the market is a bit overpriced, you probably don’t really mind. But if it’s wildly overpriced, what does that tell us about its prospects in the future? On today's Faith & Finance Live, host Rob West will talk with Mark Biller about measuring the market’s valuation. Then Rob and Mark will answer your questions about investing. 

See for privacy information.


Are stocks overvalued right now?

No doubt some are. Better question, is the stock market as a whole overvalued? Hi, I'm Rob West. If you own stocks and the market is a bit overpriced, well you probably don't really mind. But if it's wildly overpriced, what does that tell us about the market's prospects in the future? I'll talk to Mark Biller about that today, and then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance Live, biblical wisdom for your financial decisions. Well, our good friend Mark Biller is Executive Editor at Soundmind Investing, where they burn the midnight oil studying things like market valuation. Sounds like a real party over there, Mark. Great to have you back. Thanks, Rob.

It does sound pretty exciting when you put it that way, doesn't it? Mark, this is a great topic. And by the way, folks, if you have questions specifically on today's broadcast related to the market, your investments, the economy, where it's all headed, we'd love to hear from you at 800-525-7000.

Mark will be answering your questions today. Mark, today we're talking about this idea of market valuation. It comes from an article you wrote in the latest SMI newsletter titled Measuring the Market's Valuation.

It'll be available, well, it is right now at So let's start with a definition. What do you mean by market valuation and why is it important?

Yeah, great questions, Rob. So to understand how the stock market can be either overvalued or undervalued, first we've got to understand what stocks actually are. So when you own a share of stock, you have a tiny claim on the results of that business.

In other words, on the amount of profit that that company earns. Now, hopefully the company is going to grow and earn greater and greater profits over time, which will make your ownership interest, in other words, your share of stock, more valuable over time. Now, this is why in contrast to something like gold, which we talked about last month, financial people talk about how stocks can actually grow your purchasing power over time. If you own the right stocks and those companies perform well, then your ownership is going to get more valuable over time. Hopefully it can even increase in value faster than the rate of inflation. So once we establish that a share of stock is actually a claim on a tiny sliver of a particular company's earnings, well from there, we can then go about figuring out if the price that we're paying for that today is a high price or a low price.

Yeah, that's really helpful, Mark. It's of course important to recognize though that the price investors are willing to pay for company's earnings changes over time, right? Yeah, absolutely. So the price that investors are going to pay for a given dollar of earnings actually can change pretty dramatically over time. Kind of an odd concept if you've never really thought about it, but the reason that that can change so much is because investors as a group go through huge emotional swings. So there are some times when investors will pay a lot for a little bit of earnings, other times when they demand a bargain and they're going to pay very little. So this change in investor attitudes is actually a big factor that drives extended bull markets, which happens when investors are getting increasingly optimistic about the future and they're willing to pay higher and higher prices for those company earnings. It's also a factor in bear markets when stock prices are falling. Now, usually bear markets have some other type of catalyst as well, like maybe an economic recession, something like that, but investors are swinging from a place of really usually intense optimism all the way over to extreme pessimism during these bear markets, which can cause the amount that they're willing to pay for those company earnings to really plummet. Yeah, so it sounds like the key to measuring how expensive a given company or the stock market as a whole is, is to know how much it's earning, right?

Yeah, that's right. There are a lot of different ways to measure valuation, but most of the common ones do exactly that. They compare a company's price to its earnings. That's that P-E ratio that you always hear about price to earnings, and that can give us a good gauge of market or company valuation.

Yeah, very good. Well, when we come back with Mark Biller, we'll talk about what the market valuations today say about the market's prospects for the future. We'll also be taking your questions on investing-related questions. If you have a question about your portfolio, the economy, where it's all headed, call right now, 800-525-7000. We'll be right back on Faith and Finance Live. It's great to have you with us today on Faith and Finance Live. I'm Rob West.

With me today, my good friend Mark Biller. He's executive editor at Soundmind Investing. We're talking today about measuring the market's valuation. It's based on a new article in the SMI newsletter with the same title. You can read it if you'd like to learn more at

Now, in a moment, we'll be headed to the phones. We'll also get Mark's take on where the market's headed from here in light of today's valuations. But first, Mark, you offer some important warnings about market valuation in this article.

Share those with us. Yeah, I'm glad you mentioned that, Rob, because it is really important to understand what these valuation measures are good for and more specifically, what they're not good for. So first and foremost, market valuation is not a good short-term timing tool. And the reason for that is that when we're talking about valuations, we're always comparing the market's current valuation to valuations at other points in the past. So we look back through market history and we can see certain points in time, like, say, the end of the dot-com bubble in the late 90s, where we can identify that stocks were really expensive at that point in time. Then maybe we fast forward to the end of the great financial crisis and that big bear market in 2008, and we see that stocks were really cheap there.

And by doing that over time, we can see where things were really expensive, where they were really cheap, and we see that usually valuations sit in a certain range, but then as they get real high, we can identify those points real low, where things are a bargain, we can identify those points. Now, the problem is that the market can reach those levels that in the past have signaled very expensive or very cheap and then just stay there. And the best example of that that I can think of is in the late 1990s, Fed Chairman Alan Greenspan gave an infamous speech where he said in 1996 that the stock market was irrationally exuberant, and that kind of became a touch, a catchphrase within the investment community.

Everybody remembers that, and they remember that because he was right. There was this big stock market bubble forming, and we were about to have a painful bear market. The thing was, that was 1996, and the market didn't peak until early 2000. So you had almost three and a half more years of starting with expensive stocks where they just got more and more and more extended.

So obviously, if you had tried to act on the fact that stocks were expensive way back in 1996, that would have been a real bummer because the market just kept going up for three more years. So if you can't use market valuation as a short-term timing tool, which you shouldn't, then what is it useful for? And I would say the main thing that market valuation is helpful for is giving us longer range projections of what we can expect from the market going forward. So there's lots of research that shows that market valuation actually is predictive of future market returns, but only over extended periods. I've seen studies that range from 7 years to 12 years that show that the starting valuation today is very predictive over that 7 to 12, we'll call it just a decade out type of return. And the way that that's predictive is if you're starting from a very high valuation today, then the research shows probably the next 10 or so years are going to be a little below average for the market's return.

And on the flip side, if today's valuation is very low, you can probably count on above average returns over the next decade or so. Yeah, that's really helpful, Mark. And obviously, that means then we shouldn't run out and make a bunch of trades based on this information. But it can help us to make some decisions, right?

Yeah, absolutely. And I think the best way to use this information is to let it inform your planning. So for example, if you know that market valuations are high today, and you know that historically that suggests that returns are probably going to be below average for the next decade or so, then you want to plug in a more conservative return assumption into any projections you're making about your retirement plans. Now, investment advisors do this all the time. They usually use financial planning software that lets them adjust those future return expectations. But you can kind of do that as an individual as well, which can then help you realize you may need to adjust your savings rate, you may need to adjust your timing in terms of how long you plan to work before retiring. Lots of those types of planning decisions can be influenced by knowing this type of valuation information.

Yeah, that makes a lot of sense. All right, we'll get to where the market's headed, perhaps in light of all of this in just a moment. But first, let's begin to take your phone calls. Your questions today for Mark Biller on investing and the economy. We'd love to hear from you.

Eight hundred five to five, seven thousand. Gabby T. handling our phones today. She's standing by for your phone call to Cleveland, Ohio. Peggy, thanks for calling.

Go right ahead. Yeah, I was wondering what you thought about rolling over an IRA into an annuity. Hmm. Yeah, Mark, your thoughts generally on annuities?

Yeah. So generally speaking, Peggy, we're not huge fans of annuities. The reason being that they tend to be a fairly complicated and more importantly, expensive way to accomplish what they're accomplishing. Now a lot of people like annuities because of the guarantees that they provide.

And that's understandable. But you really have to be careful with the costs that you're paying. And sometimes those costs can be tricky for individual investors to decipher.

So my suggestion is to really go over the information very carefully and ask very pointed questions about the expenses and costs involved. Also keeping an eye on how long your money is locked up before you would be able to take money out without paying penalties and extra fees. Generally, we typically prefer for our folks to go outside the annuity because we feel like they can accomplish most of the same goals with lower fees and expenses. Rob, what's your take on annuities? Yeah, well, I'd agree with exactly what you said, Mark. I think the bottom line is we're going to give up the liquidity, the access to our funds and potential upside in exchange for guarantees from the insurance company. And the question is just what are your priorities?

You know, if you're saying, Peggy, that ultimately I want to get as close to risk free as possible and I'd like to transfer the risk to the insurance company for a guaranteed return or for a guaranteed monthly payout, and I'm willing to give up access to my capital without charges for that, some expenses, and I'm willing to give up some upside because there's always a cost to the downside protection, then it may be a tool for you. And Mark and I wouldn't say there's never a place for them. They're just not our preference for the reasons he mentioned.

So hopefully that gives you some things to think about. Perhaps maybe a next step if you don't already have an advisor is to do some planning, get another perspective and opinion on this. You could reach out to a certified kingdom advisor in your area. There's some great ones there in Cleveland.

Just head to our website, and click Find a CKA. But I hope we've given you a little bit to consider today as you perfectly think about whether an annuity is right for you. Thanks for calling today. We appreciate it.

Monica and Alan coming your way just after the break. Mark Biller with us today. By the way, if you'd like to support our work here at FaithFi, you can make a gift, tax deductible at

Just click Give. We'll be right back. Delighted to have you with us today on Faith and Finance Live. I'm Rob Lass.

With me today, my good friend Mark Biller. He's executive editor at Soundmind Investing. You can read the article we're discussing today at Just click on the link to Measuring the Markets Valuation. And that's what we're discussing today. What is market valuation and how does it factor into our investment decision making?

And what does it say about where the market might be headed in the future? We're going to get to that. Plus, we're taking your calls and questions today at 800-525-7000. Mark, before we head back to the phones, I have a question. Let's say you are Federal Reserve Chairman Powell. What would you do tomorrow? And then second part to that question, what do you think he will do? Boy, the first part is a tricky one.

What would I do? I'm glad I don't have to make that decision, Rob, frankly, because we really do have the proverbial rock in the hard place because inflation still is running reasonably high. So they can't really afford to back off interest rates. And yet there are signs that these higher rates are starting to cause some pain. Certainly we've seen that in the housing market where a lot of people are kind of locked in place. They can't afford to move, can't afford to sell their homes because they can't afford to trade their current 3% mortgage for what would be like a 7% or 8% mortgage. You're certainly seeing some hardship created for small businesses and so forth who are suffering from lack of access to capital as banks have pulled back from lending with these higher rates.

So it's not an easy thing. Now, as far as what I think they will do, that's a little bit easier because I do think that they've reached a point where they can at least they feel like they can afford to sit and just monitor things for a little while. You know, the recession that many people have been saying is right around the corner. They've been saying that for a year now and yet the economy still continues to hum along at a pretty decent clip. We haven't seen big increases in unemployment, which a lot of people thought we would see by now.

So I think they're going to just probably hold the line tomorrow and not make any change. But the thing about that that's a little counterintuitive is, as we wrote in an article recently, pausing is still tightening. And the reason that we say that is with these rates up where they are today, you know, if you're a normal homeowner with a mortgage and so forth, you may not have had any negative impact from these higher rates at all. But that all changes the moment you go to buy a car and get a loan or need to move because of a job change or whatever and are forced to get a higher mortgage or if you're a business owner and you need to refinance some existing business debt or something like that and your rate is going from 3% to 8%, it hits really hard when it hits. It just hasn't hit that many people yet and that's all part of that long and variable lag that we always talk about with interest rate policy where it just takes a lot longer than we sometimes expect for these higher interest rates to have an impact on the economy. That's my long-winded answer to your question there. Well, it's very thoughtful and I think you're exactly right on so many fronts.

I think the longer these rates continue to hang out there, more and more people are going to be forced to increase their borrowing costs just as the need for financing for the normal course of everyday lives, cars and homes, it's going to hit more and more people and that's of course going to have an impact on the economy. All right, let's get back to the phones. To Chicago, Monica, you've been very patient. Go ahead.

Thank you for taking my call. My question is, I'm going to be taking a substitute teacher position but in that position, they don't offer any benefits so what would be the best way to be able to save for retirement like a 401k or something like that? Yeah, so no retirement benefits.

Where should she go, Mark? Yeah, well usually if your job does not provide an employer plan like a 401k or a 403b, then usually the best option is going to be to open an IRA, an individual retirement account on your own and those IRAs offer a lot of the same benefits that you get through a workplace retirement plan. You can set those up either they call them traditional or Roth which refers to the type of tax treatment that you get but in either case, you're getting a tax advantaged way to save with a traditional IRA that can actually lower your current income so you pay less in taxes today although you'll pay more in taxes on your earnings later on as you take money out of that account or you can go with the Roth option where you're using after tax dollars today. In other words, your contributions don't change your taxable income today but then in retirement, you can take those earnings from that account out with no taxes. I know Rob and Soundmind Investing are both fans of Roth IRAs especially for younger workers.

They're a great deal for younger workers. It's a little more nuanced as you get closer to retirement age which of those are the better way to go. It's a lot of information Monica and I know it's difficult to absorb all that in a phone call like this but we have lots of articles on IRAs, the ins and outs of those on our Soundmind Investing website. If you just type in IRA in the search bar at Soundmind Investing's website, you'll find lots of articles that unpack the differences between them and how to go about that and they'll even give you some ideas of where you can open those accounts.

Yeah, I completely agree Monica. Roth IRA is a great option for you. Try to get it funded as much as you can before the end of the year and then you can turn around and put in the full contribution next year.

Eventually, down the road, maybe you'll have a full-time employer with a company-sponsored plan but in the meantime, this is a great solution. And Mark is right, a lot of helpful resources at They can even help you through the SMI newsletter.

Select the mutual funds that you'll want to invest in once you make the contribution in the Roth IRA that you open at Fidelity or Schwab or one of those discount brokerages. Thanks for calling. And Alan, coming your way after the break.

We'll be right back. Great to have you with us on Faith in Finance Live. Hey, are you struggling to stay on budget during the month? Do you find that you and your spouse are wondering where do we stand in that particular budget category? Well, the FaithFi app could be just what you need to set up your spending plan and keep control of it to give every dollar a job. You can learn more at

Just click the app tab or just head to your app store wherever you download apps and type in FaithFi, Faith in Finance and check it out today. All right, Mark Biller with us today. We're talking about the markets, market valuation, your stock portfolios and dealing with your questions. Let's head back to the phones.

Ann has been waiting patiently in Indiana. Go right ahead. Thank you for taking my call. Sure. I well, I've recently a few years ago invested in the stock market and it's been a few years. We've lost some money and it's just been going up recently, but now we've been dropped and our account was put into Schwab Alliance and I don't know where to go from here. Am I in the right account?

Do I need a manager to manage the account? Because I don't know anything about it. So that's the question.

I know you've talked about Charles Schwab Intelligence Portfolio. So I'm just wondering, what do we do? It's not a lot of money. But, you know, I'm a little fearful of the market.

My husband's 79 years old. And we didn't, you know, we're, we don't want to lose any money. We're not, we're not able to lose any money. Yeah. Let me ask you a couple of questions. And I certainly understand where you're coming from.

And we want to try to help guide you from here. So this IRA, you said it's it's your husband's IRA. Is that right? Yes. How much is in it?

Roughly? It was we were just testing the water. We put in 30,000. Now it's gone down to 28.

Okay. And you said we were dropped. Where was it? And I know you're unclear as to where it's gone. But where did you set it up initially? I don't want to say the name. It was a Christian organization.

Okay. So they were managing it, but then maybe they decided it was too small. And so they moved over to the retail side.

Right? We were we're going to put in extra money to to reach their dollar amount. But I like I said, I'm, I know somewhat of the computer, but I'm not computer savvy to do all the stuff on the line. Okay, that was the reason. No, that's fine. I certainly understand.

And let me just ask a couple of other questions. So you all are both fully retired, correct? Well, I'm disabled and my husband's retired.

Okay. And what are you all living on? Does he have a pension or a retirement plan in addition to social security? We're basically just no he is no he he just social security. Okay, that's it.

And is that enough me and social security for him? Yeah, because we live a very modest life. Okay.

And what other investable assets do you have, if any? Well, we have some CDs. Okay.

It's out there. Okay. All right. That's fine.

I'd say over 500. Okay. And, and then do you have some liquid savings as well? Or is it all tied up in CDs? Yeah, basically tied up. Okay, very good.

So Mark, you heard her question. Obviously, they're concerned about the market. The good news is this 28,000, although we don't want to lose a dollar of God's money, they're the stewards. This 28,000 is a very small portion of their overall investable assets. And on top of that living modestly, they don't even need it right now unless obviously they had major medical expenses or something like that.

So where would you tell her to go from here? Yeah, I think and the biggest, biggest thing to figure out first is to, you know, figure out your expenses relative to the income that you have coming in. And that will help determine how you want to invest the overall portfolio that you have. And so if your current income is sufficient to meet your expenses, or if you're only needing to draw very slowly from these investments, then it's probably okay to keep this quite conservative.

As you mentioned, you really don't want to see any losses. And the nice thing right now is for the first time in the last 15 years or so, you can actually earn pretty decent returns without taking risks by using either US Treasury bonds or by even just keeping money in CDs and money market funds. Today's closing interest rates on the two year and ten year US government Treasury bonds were the highest that they've been in 15 years. So you know, if you think about the stock market, traditionally, over time returning somewhere in the nine to 10% a year range, well, you can get half of that right now with zero risk just sitting in a money market fund. So that's a very attractive option. Schwab has some of their own kind of house brand money market funds that are very competitive with anything else in the market. So you might start by just searching at least while you're figuring out what you want to do longer term with this money, you could just go to your Schwab account and look up Schwab money market funds and choose one of those and put that money in there and immediately be earning 5% or so in that investment. Now longer term, you need to think through how much if any of this you want to have allocated to stocks, as well as maybe some a little bit longer term bonds than just a money market or CDs. But those are decisions that you don't have to make right away. And, you know, they're good options just using broad market index funds, S&P 500 type index funds to get a little bit of stock exposure if you feel like that's going to be appropriate. Usually you want to have a little bit of that in your portfolio, even during retirement to help your portfolio keep up with inflation over time. But a lot of a lot of good news there. And I know it can be scary trying to transition from one way of doing it to another. But I think you've got some good options there at Schwab.

Rob, your thoughts? Yeah, I guess the only thing I would add is just, you know, again, I understand your risk averse, and there's certainly nothing wrong with that. But if you have a half a million plus in CDs, I mean, this 30,000 represents about 6% of your total investable assets, and maybe you have more than, you know, 500,000. So if that's the case, then, you know, Mark, and I would typically tell you in retirement to, you know, to avoid the erosion of your purchasing power and offset inflation, you might want to have 30 or 40% in stocks. Well, you know, even if this was 100% in stocks, this IRA, it's only 6% at a minimum of your portfolio, or at the most. So I would say, you know, again, you've got a you're ultimately the steward, you need to make the decision if you'd rather be in money market or CDs, even with this IRA, that's fine. But I don't see any reason why you wouldn't go ahead and put this in stocks knowing that yes, it could lose money, we could lose more if we hit a recession. But if the Lord tarries and you're in good health, you need this money to last you decades potentially. And you could have very expensive medical, you know, expenses like long term care needs down the road where you'd have to tap into some of this money. So keeping a portion of it very conservative like you have with the CDs is great. But I think using either, you know, the Schwab intelligent portfolios or some mutual funds that soundmind investing could help you with inside that Schwab IRA makes a lot of sense.

You just need to have a long view with it and know that any losses or paper losses, and you're really looking out 10 years plus. I hope that helps and thanks for your call. Alan, you're up next. We'll be right back on faith and finance live. Great to have you with us today on faith and finance live Mark Diller with me today from soundmind investing. We're talking about market valuation and your investing related questions back to the phones we go to Kansas City. Hi, Alan, thanks for your patience, sir. Go ahead.

Well, it's interesting. The first caller I heard today asked about an annuity, I'm going to do the same thing but a little different direction. I have money currently, qualified money in a fixed annuity. And the only reason it's there is previously had a 401k that I needed to roll into something and I had this fixed annuity already in place been in place for a number of years. So I knew I could safely put it in there until I decided what I want to do with it.

And there was no surrender charges or anything to be considering. So I went ahead and did that it's fixed to 3%. As a minimum, that's what's been earning since I put in there about 18 months ago. However, I'd like to do more than that with it. I also want to try to protect this money. Again, I'm 63 years old, it's not my only money. I've got other other sources, other retirement accounts and actually in currently in business with my son and where got a good business.

So plan to work for long as Lord let me and so at least in our seven, eight, nine, 10 years. But anyway, that being said, I've been looking at a variable annuity, but it's a variable indexed annuity. And essentially the way this is set up, as it stands right now, and they adjusted occasionally, but right now, if I were to do it today, it would pay seven and a half percent. The only caveat is it pays seven and a half percent, as long as the S and P 500 for that year is equal or positive. In other words, it's not negative, um, cannot lose any of your principle.

There are no fees or costs to the annuity, but that one aspect has me still a little uneasy. Um, the illustrations they show indicate that probably on average three out of five years, S and P 500 is, is positive, but you know, certain times we're at right now and why things may be looking forward. I don't know if that's a good move or not. So I'm asking some questions.

Yeah, thanks for that, Alan. So if I understand correctly, uh, if the S and P is negative at all, even one point, then you're, you're zero for the year. How does that work? Well, my understanding is, you know, that's, that is a good question. I haven't clarified. I don't know if it's at any time during the year or if it's for the calendar year, uh, it was presented to me that that's what the, what it averaged for that calendar year.

I want to say that calendar year before that policy year, because obviously it's based on when you take this out, but, uh, so that's something I need to clarify. I know. Yeah, but you either get zero or seven and a half. You don't get anything in between that, right? Right.

The rate will never change. There's nothing in between. Yeah. So, okay. Yes. Yeah. Mark, your thoughts on this type of product?

Yeah. So, um, as, as you're explaining this, Alan, I think, um, you know, you're, you're making some of the points that we were raising earlier, that these investments can quickly become kind of complicated, a little bit hard to understand and think through all of the, the potential outcomes, um, which, you know, is, is one of the drawbacks with annuities in general. Um, you know, I think, um, in your shoes, Alan, if I were handling this, I would probably first go to the company that you have the fixed annuity through and ask somebody to walk through the, the various options with you that they have, um, to see if they can give you a little better deal. Um, if you're framing this in the context of I'm in this current product with you, would like to stay, but I need a better, a better product, a better option and see what they have. Um, I would also, before you make any decisions, um, I would, I would look at some of the newer products that are, are available now, um, through other companies. There are some, some very innovative companies that have been rolling out, uh, ETFs, exchange traded funds that basically mirror some of the better aspects of annuities, um, in that they offer some of these, uh, upside caps downside protection, but they're doing that through a very low cost ETF structure.

Um, I know, um, Allianz, uh, is one company that's offering these. There are some others, but if you search, just do a web search for buffered ETFs and then compare those, um, with what you're being offered from this, uh, annuity provider, it may be kind of eye opening, um, in terms of the, the upside downside, uh, caps and the, the, the offer that's being made there. Um, of course, um, if you heard our earlier conversation about the annuities, you know that our, our starting point is generally that you can, um, cobble together a similar risk return type profile and probably do that in a, uh, a less restrictive, less costly way outside of annuities, but that's not to say that you can't get a good deal, um, within an annuity. You just have to sometimes do a little more homework and a little more, um, looking around, asking questions, you know, uh, to make sure you're getting a really good deal on that. Um, Rob, your thoughts? Yeah, no, I, I really like the idea of the buffered ETFs.

This is something that's gaining in popularity and, you know, if we can accomplish the same thing with less expenses, obviously that's the name of the game. Uh, Mark, would you agree with that three out of five on average number in terms of the number of years positive versus negative on the S and P? It probably is, is accurate. In fact, it may even be a little bit more skewed in terms of positive years. The problem that you run into on the annuity side is, um, typically you're working with a cap on, on your good years. And since the market, you know, it may average 10% over time, but it's plus 23 minus nine plus 18, you know, minus one. And if you were getting the full plus 23 during those good years, well then it all evens out. But if you've got a cap in there where you only get say the first nine percent, and then you're capped, well, those good years, it doesn't really matter that, that you have more good years than down years. If you're, you're not getting the full benefit of those up years, uh, particularly if you're bearing more of the risk of those down years. And, and it is a little tricky in this particular case, Alan, to understand exactly what's happening in those downside years.

So you just really have to work, you know, very, very hard to get a clear picture of exactly how this is going to work out. And then I would run some scenarios, you know, just take the last 10 years of, of market returns, uh, or any historical 10 year period and kind of walk through what would have happened if I'd had those returns in that sequence. Um, and that can give you a little bit of an idea. So yeah. Yeah, very good. Well, Alan, I hope that's helpful to you, giving you at least some ideas to think about as you consider this.

Thanks for calling today. Uh, Mark, let's give folks a chance to understand your thinking as we go back to market valuations on what does today's valuation actually say about where the market might be headed from here? Yeah, well, unfortunately, you know, most measures are showing that the market is pretty expensive today. Um, you know, there, there are different ones that suggest it's modestly overvalued.

There are others that go all the way out to it's extremely, uh, highly valued, uh, overpriced, however you want to say it. So, you know, going back to what we were saying earlier, that really should inform some of our, uh, planning decision making. Uh, we want to assume that maybe the, the decade ahead is going to, uh, produce below average market returns is, is probably, uh, a likely outcome. And, you know, as we look at how that tends to happen, it usually isn't a smooth progression of slightly lower returns. It tends to happen through, um, through bear markets.

So if you think about the end of the dot com bubble in the late 90s, the way that overvaluation got corrected was through two fairly significant bear markets in the decade ahead. So I would just use this information to suggest that people should, should really think about what is my bear market plan. If we have a repeat of the type of year we had last year where we have a 25 to 30 percent or even a little more type of pullback at some point, what is my plan? And as long as you know how you're going to handle that, um, you know, you're probably going to be able to weather that. What ha, what tends to happen is people who don't have a plan, they see their investment accounts falling and they start making bad decisions, which can really hurt their long-term returns. So that's kind of how we see it and, and how to shape a plan around that is really the important thing from here.

Yeah, that makes sense. Mark, just as we wrap up here, we have just about a minute left. For those folks who are concerned, maybe a little anxious just about everything swirling with the economy, their portfolios, how might you reassure them from scripture? Yeah, well, first and foremost, our hope is not in our 401k accounts.

It's not in the Federal Reserve or the US economy. As wonderful as it usually is, our hope is in the Lord. So as stewards of the Lord's money, we want to be as informed as we can and make the best decisions that we can. But ultimately, um, you know, we do the best we can and then we trust the Lord, um, for the, for the rest and to make the ultimate provision, which he promises to do for his children. So we want to do our part as stewards, and then we want to trust God to do his part as our provider.

And, uh, hopefully that fruit of the Spirit, the peace, uh, that, that we're looking for, um, is part of our lives and part of the, the conversation here around our money. So it's nice to know it's not all on our shoulders. That's for sure.

That is for sure. Well, really appreciate your insights today. My friend, it's always a pleasure to have you with us. Thanks for stopping by. Thanks, Rob. Always a pleasure. He's Mark Biller, executive editor at Sound Mind Investing.

You can read today's article that we've been discussing about market valuation at their website, Well folks, thank you for being with us on behalf of our team today, Gabby T, Robert Sutherland, Dan Anderson, and Amy Rios. I'm Rob West. Faith and Finance Live is a partnership between Moody Radio and FaithFi. You can support our work at

Just click, give. Come back and join us tomorrow. We'll see you then. Bye bye.
Whisper: medium.en / 2023-10-07 13:42:47 / 2023-10-07 13:58:34 / 16

Get The Truth Mobile App and Listen to your Favorite Station Anytime