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US Equity Valuations: Difference between revisions
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(Created page with "== Important Ratios == === Equity Pisk Premium === By comparing the current real cost of debt and equity for companies, and subtracting the current real interest rate. <ref>h...") |
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By comparing the current real cost of debt and equity for companies, and subtracting the current real interest rate. <ref>https://www.bloomberg.com/opinion/articles/2023-09-11/equity-risk-premium-s-guide-to-the-galaxy</ref> | By comparing the current real cost of debt and equity for companies, and subtracting the current real interest rate. <ref>https://www.bloomberg.com/opinion/articles/2023-09-11/equity-risk-premium-s-guide-to-the-galaxy</ref> | ||
* A fall in the ERP on this scale is unusual. Such a fall in 12 months “has only occurred seven times prior to now since 1983 and usually coincides with a large monetary event or an equity market shock/bubble.” | * A fall in the ERP on this scale is unusual. Such a fall in 12 months “has only occurred seven times prior to now since 1983 and usually coincides with a large monetary event or an equity market shock/bubble.” Lenner CS. | ||
* In the 12 months to the end of August 2023, the S&P 500 managed a price return of 14%. Of that, increasing price/earnings multiples accounted for 12.4 percentage points, according to a decomposition by Patrick Palfrey of Credit Suisse AG. Earnings themselves accounted for 1.4 percentage points. So valuations have boomed. | * In the 12 months to the end of August 2023, the S&P 500 managed a price return of 14%. Of that, increasing price/earnings multiples accounted for 12.4 percentage points, according to a decomposition by Patrick Palfrey of Credit Suisse AG. Earnings themselves accounted for 1.4 percentage points. So valuations have boomed. | ||
* For valuations like this to make sense, investors must be assuming that bond yields are going to tank, which can only happen if inflation is not only beaten but totally trashed. | * For valuations like this to make sense, investors must be assuming that bond yields are going to tank, which can only happen if inflation is not only beaten but totally trashed. | ||
[[File:-1x-1 (1).png|center|thumb|1014x1014px|https://www.bloomberg.com/opinion/articles/2023-09-11/equity-risk-premium-s-guide-to-the-galaxy]] | [[File:-1x-1 (1).png|center|thumb|1014x1014px|https://www.bloomberg.com/opinion/articles/2023-09-11/equity-risk-premium-s-guide-to-the-galaxy]] | ||
=== Shiller P/Es or “CAPEs" === | |||
[[File:Spe.png|center|thumb|995x995px|https://www.bloomberg.com/opinion/articles/2023-09-11/equity-risk-premium-s-guide-to-the-galaxy]] | |||
== References == | |||