Goldman Sachs: 'We cannot emphasize enough that valuation metrics are NOT historically mean reverting' 🤯

Just because you can calculate an average doesn't mean it'll have a gravitational pull🤦‍♂️

The idea that valuation metrics revert to some long-term average is one of the more common arguments advanced by those asserting that stocks are expensive and due to fall.

But the tendency for valuations to mean-revert is a myth, argue Goldman Sachs analysts.

“While we have incorporated valuation metrics as one of the inputs into our investment process, we cannot emphasize enough that valuation metrics are NOT historically mean-reverting,” the analysts wrote.