. Nail those three factors, and the future becomes much less nebulous. These are the factors that drive returns.
"The highest degree of predictability is the cash flow: What is its current income yield," he said. "If you can lock in the dividend yield, that's the most predictable — and then it gets more challenging after that." Stein refers to the notion above as the "math of investing" — and uses this historical data as a measuring stick. It's a valuable gauge to juxtapose other assets against. He whittles down until potential allocations look ripe for the picking."The emotion is what investors are paying for those cash flows, and how that changes," he said. "That's the least predictable.
Today, the S&P 500's price-to-earnings ratio is just below 20. Historically, it's been around 17, which means that stocks are on the loftier side of valuations.