CAPE: Tactical Asset Allocation During Cheap Markets

Tactical Asset Allocation During Cheap Markets by Wesley R. Gray, Alpha Architect

In our last post, we looked at tactical allocation using valuation metrics and trend-following measures.

Our conclusion from the analysis is that discerning robust trading signals based on  market valuations is difficult at best.

This research piece attempts to dig a little deeper and addresses the following questions:

• Opportunity Costs
  • How do other asset classes perform during different CAPE regimes? Why go all-in on equity if bonds are the asset class that outperforms?
• Diversification
  • Do we abandon diversification and shift heavily into equities following cheap...
    

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