CAPE: Tactical Asset Allocation During Cheap Markets

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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 markets? Real Equity Premium…


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