Search Results for: equity risk premium

S&P 500 ERP and S&P 500 Fwd vs. Trailing EPS The S&P 500 looks unattractive until the equity risk premium increases. Image: Morgan Stanley Research

Cross-Asset Valuations on their 10-Year Range Equity risk premiums suggest that equities are still cheaper than average. Image: Morgan Stanley Research

U.S. Financial Conditions Relative to the low VIX and favourable financial conditions, the equity risk premium remains quite high. Image: Fidelity Investments

U.S. Rates Chart showing the dramatic plunge in interest rates over the past 10 months. On the positive side, the equity risk premium (ERP) is now higher. Image: Fidelity Investments

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…

Over The Last 6 Months, The S&P 500 Lags Bonds, Gold And Global Stocks Last year, the sell-off of stocks was a correction from a bad equity risk premium and an overvalued stock market, as suggested by our forecasting models. Image: Bloomberg

Why Warren Buffett says that stocks are generally better than bonds? Our equity risk premium model shows when the US stock market return for the next 10 years is more or less attractive than the 10-Year Treasury Note. Since 1970, the 10-year Treasury Note was less attractive than the US stock market over a 10-year…