Shifts & Narratives#1 Do not give up on fundamental valuations

April 9, 2021

Today, most investors are at a loss regarding what to think of the notion of value and valuations and, even most importantly, how to use it in portfolio construction. We are at the start of a sort of crisis in confidence regarding valuations (and therefore also fundamentals, as they are interlinked) because few to no valuation indicators seem to be effectively working and irrational forces are perceived to be taking a prominent role in driving financial markets. There is a great disconnect between financial markets and the real economy.

The temptation is to give up on value/fundamentals as a founding investment principle or to just consider short-term relative equity/bond valuations instead of more strategic absolute metrics.

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