VisualMod t1_iui173n wrote on October 31, 2022 at 2:19 PM

#384,084

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VisualMod t1_iui184c wrote on October 31, 2022 at 2:19 PM

#384,092

>The chart above shows the ratio of real yields (inverted) to forward 12-month P/E ratios for the S&P 500. A rising ratio indicates that equities are becoming relatively cheaper, while a falling ratio indicates that they are becoming relatively more expensive. As you can see, since early 2018 equities have become increasingly cheap relative to bonds. This is due to the sharp decline in bond yields (driven by Fed rate hikes and quantitative tightening), combined with only modest declines in equity valuations. We believe this trend has further to run, as we expect bond yields to continue declining while equity valuations remain broadly unchanged. This should lead to continued outperformance of stocks over bonds in 2020.