Two Hundred And Seventeen Years.

It’s no secret that financial assets of all stripes are expensive.

As it turns out, that’s what happens when you print $15 trillion out of thin air and ram it down the market’s throat…


Who knew, right?

As noted on Tuesday, everything (bonds, equities, and credit) is stretched the proverbial breaking point:


What you see in the red box are the 10y percentile rankings. Wouldn’t it be super-fun if someone looked at bonds and equities from 15 DM countries going back 217 years and then made an equally weighted index to find out how expensive things really are versus history?

Well that’s exactly what Deutsche Bank did, and you’ll never guess what they found… 

Via Deutsche Bank

In the last couple of annual long-term studies we have highlighted that we’re in a period of very elevated global asset prices – possibly the most elevated in aggregate through history.

Figure 57 updates our analysis looking at an equal weighted index of 15 DM government bond and 15 DM equity markets back to 1800. For bonds we simply look at where nominal yields are relative to history and arrange the data in percentiles. So a 100% reading would mean a bond market was at its lowest yield ever and 0% the highest it had ever been. For equities valuations are more challenging to calculate, especially back as far as we want to go. In a 2015 study we set out our current methodology but in short we create a long-term proxy for P/E ratios by looking at P/Nominal GDP and then look at the results relative to the long-term trend and again order in percentiles. Nominal GDP data extends back much further through history than earnings data. When we have tracked the two series where the data overlaps we have found it to be an excellent proxy.

As can be seen, at an aggregate level, an equally weighted bond/equity portfolio has never been more expensive.


Nothing further.



3 thoughts on “Two Hundred And Seventeen Years.

  1. Very interesting. If one was lucky enough to start accumulating capital at the bottom in the early 1980s and be retired about now one could sure delude himself into feeling like a genius instead of a lucky rider on the curve. Hence my nom de plume. It has been a hell of a ride.

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