If You Think Valuations Irrelevant, You Don't Understand Them

In recent decades, there have been points where stocks were steeply overvalued (as I observed in 2000, 2007, and of course, in recent years), clearly undervalued (as I observed in 1990 and late-2008), and neutral enough to adopt a constructive outlook based on improved market internals (as I observed in early-2003). Regardless of the situation, I've always emphasized a key fact: valuations have a profound impact on 10-12 year market returns, and on potential losses over the completion of any market cycle, but have little impact on market outcomes over shorter segments of the market cycle.