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I disagree. The sudden jump in equity prices that happened over the last few years looks to me like a classic case of the markets pricing in high future inflati
by SuoDuanDao 7y ago
I disagree. The sudden jump in equity prices that happened over the last few years looks to me like a classic case of the markets pricing in high future inflation.
- nabla9 7y agoBond yield is classic indicator for future inflation. Look at Treasury yields for next 10 - 30 years. https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...
- SuoDuanDao 7y agoHuge amounts of cash has been printed and used to buy bonds over the last ten years, I don't think the bond market is a useful means of price discovery as a result.
- AnimalMuppet 7y agoI think it's kind of the reverse. Stocks should sell at risk-adjusted rate-of-return parity with bonds. If inflation is 1% (and is expected to stay there), then what's $1 of corporate profit worth? $100 (same as $1 of bond interest would cost). So the stock market has soared because interest rates have fallen. Money has moved into the stock market, seeking rates of return, and has continued to do so until the rate of return of stocks was not higher than the rate of return of bonds.