Hussman Stock Valuation Models

John Hussman is one of the best portfolio managers around.  His ability to take complex topics and distill them down to simple readable articles makes his weekly commentary a must read (although he does go off on PhD level rants on occasion).

I thought I would build some Excel sheets that tracked his stock market valuation models in some of these posts:

Estimating the Long Term Returns on Stocks

The Likely Range of Market Returns in the Coming Decade

Anyone with a few hours and the inclination can re-create these (I used the Shiller dataset).  The charts all look similar (though I took them back to 1900).

The summary from the models is that equities are looking at pretty subdued returns for the next decade.  At a terminal PE Ratio of 15 you are looking at about 2% a year.  Even at a PE of 20 you are looking at a little of 5% returns.  And those are nominal returns.

Real returns are negative or only slightly positive (I included terminal inflation of 3%).

And his dividend model: