Valuation is an important criteria for evaluating investment prospects.  Current valuation levels are generally at above-average levels for all major asset classes except emerging markets.  Valuation does not have significant predictive value on a short-term basis but it does impact longer-term returns.  At current valuation levels, longer-term stock performance is expected to be positive, but at levels that are below historic average performance levels.  Valuation levels are also important for comparing relative long-term performance potential of various asset classes.  For example, it is helpful to rebalance a portfolio so that overweight and overvalued asset classes are trimmed, and funds are put into relatively underweight and lower-valued asset classes.