- In a world where asset valuations are expensive across the board, U.S. growth stocks manage to stand out as being particularly overvalued.
- The Vanguard Growth ETF trades at a price-to-earnings ratio of 44x, even with earnings sitting at all-time highs and total market capitalization sitting at almost USD25trn.
- The VUG ETF undoubtedly holds some of the best companies in the world, but this does not mean they will make good investments.
- Even under a partial valuation mean reversion scenario, GMO expects U.S. Large Cap Growth stocks to lose 8.9% per year in real terms for the next 7 years.
- Even a combination of large share price declines and continued strong growth would likely not be enough to see the VUG fall to valuation levels that would generate strong future returns.
For further details see:
VUG: Ground Zero Of The Everything Bubble