Shiller Says U.S. Stocks Can Rise Another 4% With Trump Bump

21.02.2017 / 03:27

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U.S. stocks can still rise as much as 4 percent beyond their current record highs, based on an analysis of price-earnings ratios over the long term, according to Robert Shiller, the Nobel Prize-winning Yale University economist.

“Maybe this isn’t the time to bail out of the market,” Shiller said at a forum Thursday in Beverly Hills, California, hosted by DoubleLine Capital, which offers funds using his investing methods.

The Dow Jones Industrial Average, which closed at a sixth straight record high, has returned more than 13 percent since the Nov. 8 U.S. presidential election. Most U.S. stocks fell on the day after the longest rally in three years, with the S&P 500 Index slipping 0.1 percent.

The $2.5 billion DoubleLine Shiller Enhanced CAPE Fund, co-managed by Jeffrey Sherman and Jeffrey Gundlach, had annualized returns of 16 percent in the past three years, beating 99 percent of peers tracked by Bloomberg. The fund combines DoubleLine’s fixed-income strategies and a method developed by Shiller to buy industry stock sectors seen as undervalued based on his cyclically adjusted price-to-earnings ratio analysis. The so-called CAPE ratio divides the price of a stock over a company’s 10-year average earnings.

DoubleLine Capital started the Shiller Enhanced International CAPE Fund, which focuses on global fixed income and European equities, in December as the firm broadens its offerings. Headed by Gundlach, DoubleLine managed $101 billion as of Dec. 31. Shiller said valuations are even better in Europe than the U.S., based on his CAPE model.

“Europe is much cheaper than the U.S.,” he said. “My instincts are to go Europe.”

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Shiller Says U.S. Stocks Can Rise Another 4% With Trump Bump

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