equity preference

Equity preference by investors as seen through the asset growth effect is a strong predictor of future stock market returns. In examining the capital cycle of equity preference, we can see a very strong correlation with 10-year future returns in the S&P 500. The outlook at present suggests single-digit returns in the next decade. By Joseph Noko   *** Capital Cycles and the Asset Growth Effect  High returns on invested capital (ROIC) invite capital and new investment, bidding up asset prices to euphoric valuations while eventually creating excess capacity, plunging economic earnings below the cost of capital, sending a market lurching forward to what Joseph SchumpeterRead More →