The total return of the S&P 500 still remains behind risk free T-bills since its January 2022 peak more than two years ago.

Two years is too short a time frame for long term investors to care. Most retirees (like me) are advised to have 5 or more years of living expenses in cash. We keep most of the rest in index funds to beat inflation and enjoy a higher Safe Withdrawal Rate. Investors should expect returns to beat cash yields over 5 to 10 years, not 2 years.

Kinda what you'd expect from these valuation levels? S&P 500 P/Book is currently 4.65, in 2009 it hit 1.78.

The relationship between the price-to-book (P/B) ratio of the S&P 500 and future market returns is a complex and debated topic. While some studies have found a negative correlation, suggesting that lower P/B ratios might predict higher future returns, others have found no significant relationship or even a positive one. Here's a breakdown of the key points:

Evidence for a negative correlation:

Value investing strategy: This strategy relies on buying stocks with low P/B ratios, believing they are undervalued and have potential for higher returns. The success of value investing strategies over time provides some evidence for a negative correlation.
Academic studies: Some research has found statistically significant negative correlations between P/B and future returns, particularly over longer time horizons.

Evidence against a negative correlation:

Other factors: Numerous other factors influence market returns, such as economic conditions, interest rates, and investor sentiment. P/B might not be a strong enough predictor to overcome these other influences.
Short-term vs. long-term: Correlations might be stronger over longer time horizons (5+ years) compared to shorter periods like 2 years.
Conflicting studies: Not all studies find a negative correlation, and some even find a positive one, suggesting the relationship might be more nuanced or non-existent.

Overall conclusion:
While there is some evidence for a negative correlation between P/B and future returns, it's not a foolproof predictor.
Other factors significantly influence market movements, and the relationship might be weaker over shorter time horizons.
Relying solely on P/B for investment decisions is risky, and considering other factors alongside it is crucial.

Source: gemini.google.com