"Extreme valuations mean extreme sensitivity
Prior to the bubble period of recent decades, the average dividend yield of the S&P 500 was close to 4%. During much of the post-war period, the combination of robust labor force growth, high productivity, and moderate inflation generated growth of more than 6% annually in nominal fundamentals. Add a 4% dividend yield to 6% nominal growth, and there’s the average 10% nominal return that investors associate with historical returns for the S&P 500, and imagine is still a relevant figure despite current valuation extremes.
In a world where the S&P 500 yields 4%, pushing long-term expected returns up by 0.5% requires a loss of (.04/.045-1=) just -11% in stock prices. But see, in today’s world where the S&P 500 yields 1.6%, pushing long-term expected returns up by that same 0.5% requires a loss of (.016/.021-1=) about -24%.
So it’s not enough to assume that extreme valuations will be sustained over the long-term. One also has to assume that there will be virtually no change at all in expected returns. That’s because even slight increases in expected returns from these valuations are likely to drive steep drawdowns in stock prices." - Hussman Funds
... while reminding ourselves that even with two Financial Bubbles, so far, S&P net returns lagged those of US T-Bills, including the 2000 and 2009 market tops!!