Thursday, 18 January 2018

The Demise Of The One Factor That Has Temporarily Justified Extreme Stock Market Valuations

One of the very few good reasons left to buy equities during especially the last year has been historic low interest rates. But broadly speaking, this is not a recent phenomena as it has been the case, from a valuation standpoint applying a more "normal" level of interest rates, for at least the last three years. Many whom are not making decisions based on hopes and dreams are aware of this fact, but nonetheless maintain a relatively high allocation toward equities in a desperate chase for yield.

But with U.S. stock prices surging yet higher in recent months combined with rising treasury yields, this "last man standing" deliverer of a good, but temporary, reason to own stocks is perhaps finally throwing in the towel; the spread between earnings- and treasury yields. 


Interpreting Mean Reversion: Time Varying Equity Premium

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