Russell 2000 Forward P/E vs. Subsequent 10-Year Annualized Returns

Should long-term investors allocate a larger portion of their portfolios to U.S. small-cap stocks, as the absolute forward P/E for the Russell 2000 indicates the potential for double-digit annualized ten-year returns?

Image: BofA US Equity & Quant Strategy

Russell 2000 Forward P/E vs. Subsequent 10-Year Annualized Returns