Shareholder Return vs. Free Cash Flow Thanks to low interest rates, shareholder return has exceeded free cash flow levels again. U.S. companies cannot spend more than they earn indefinitely. Image: Goldman Sachs Global Investment Research
Dividends and Buybacks vs. Free Cash Flow Dividends and buybacks have exceeded free cash flow levels again, thanks to low interest rates. But companies cannot spend more than they earn forever. Image: Capital Group
U.S. Equity Fund Flows vs. Bonds and Cash This chart puts into perspective the rotation from equities to bonds and cash, as investors become cautious about further growth. Image: Goldman Sachs Global Investment Research
U.S. Fund Flows Chart showing the large divergence between flows into equity funds and those into cash and bonds. Image: Goldman Sachs Global Investment Research
Money Market Fund Flows and Probability of Recession Investors move to safe assets by raising their cash holdings, like 2007/2008. This chart suggests that the probability of a recession in the next 12 months is high. Image: Goldman Sachs Global Investment Research
Flows into Money Market Funds Just like 2007/2008, investors move to safe assets by raising their cash holdings, despite falling rates. Image: BofA Merrill Lynch
S&P 500 Payout Ratio Stock buybacks and dividends as a percentage of free cash flow are reaching dangerous levels. Image: MarketWatch
Why Lower Bond Yields Influence the S&P 500? Because lower interest rates push stock market multiples higher. If interest rates are lower, then the value of future cash flows increases, because future cash flows are discounted back at a lower interest rate. So, lower U.S. 10-year yields influence the stock market equity risk premium. On the other…
Aswath Damodaran – Laws of Valuation: Revealing the Myths and Misconceptions Aswath Damodaran is professor of corporate finance at the Stern School of Business at New York University, with his unique perspective about equity valuation. Here, he talks about the corporate life cycle, corporate finance, cash flow and the laws of valuation. https://www.youtube.com/watch?v=c20_S-QgvsA