Ben Carlson, Columnist

Stock-Market Valuations Won't Tell You What's Next

They don't signal when to get out or when to get back in.

October 25, 2017 at 5:27 PM UTC

Ben Carlson is director of institutional asset management at Ritholtz Wealth Management. He is the author of "Organizational Alpha: How to Add Value in Institutional Asset Management."

Searching for clarity.
Photographer: Stan Honda/AFP/Getty Images

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Investors have been warned about rising stock market valuations for years. Some have been calling them a bubble. Others assume they mean a crash is imminent. Still others have been telling investors to expect low returns for the foreseeable future.

The problem is that most investors don’t really understand what higher-than-average valuations mean for stocks, and the data is highly inconclusive.