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Understanding The Valuation-Rates-Macro Nexus
If last year's cross-asset malaise taught us anything, it's that no correlation, no matter how reliable, is an immutable market truth.
For many, the idea of bonds as the potential sponsor of a market event seemed far-fetched. The notion that bonds might become a correlated asset and a source of portfolio volatility likewise sounded too bad to be true.
Generally speaking, savvy market participants did appreciate the perils inherent in a dozen years of ultra-accommodative monetary policy that se
Thank you very much. This has been foremost on my mind.
I don’t understand the lesson of the SG chart. The 2007-2020 and post-pandemic curves are pretty parallel (slopes similar at a given rate vol). The post-pandemic curve has PE rising a little more steeply at low rate vol levels, which seems like equity investors should like. Both curves suggest that rate vol is at the point where PE becomes fairly insensitive to further increases in rate vol. Which makes PE look like a one-way bet from here.
The more natural state he is referring to is the price to earnings historically back to 1900 . That’s how I take it.
2018 may have been Powels first attempt at old normal.
By the 2010s and forwards many were saying that passive investors/retirees were being forced out the risk curve.
Benjamin Graham never really departed from his belief that a satisfactory, “normal” multiple was 14-15x. However, even in the 20th Century, Drug stocks, tech stocks and high growth companies regularly hit 20x or more. We’ll see.