Grantham On Estimating End of The Bull Market

Deciding whether markets are over or under-valued involves a lot of arcana: forward vs trailing PE, CAPE, Tobin’s Q, investor sentiment, and a host of proprietary models might all give you different answers. In BMO’s quarterly letter, Jeremy Grantham explains two other investment rules that he hasn’t used since the late 70s, and why they should keep the markets going until the next presidential election.

Since 1964 there has been a striking pattern in S&P 500 returns versus the presidential election cycle. The first and fourth year of each term are mixed, the second year tends to be down, and the third year is strongly positive. The speculation, in line with the Greenspan-Bernanke-Yellen...