Factor Allocation

What is Factor allocation and ow can it help you in frothy markets?

In August, GMO's James Montier and Matt Kadnar published an article claiming that based on past performance, and valuation, the S&P 500's total return over the next seven years is likely to be negative.

[klarman]

Specifically, Montier and Kadnar noted that between 1970 and 30 June 2017, an investment in the S&P 500 produced a real total annual return of 6.3%. Broken down, 3.4% of this return was from dividends with 2.3% from earnings growth. The remained of the return was a result of margin and multiple expansion. However, over the last seven years, margin and multiple expansion have accounted for around half of the S&P 500's average annual return of...