6 ms·
It seems that interest rate x P/E is a ~constant. Interest rates are near historical lows and have been falling. Therefore P/Es are high. Have to check if th
by psadri 6y ago
It seems that interest rate x P/E is a ~constant. Interest rates are near historical lows and have been falling. Therefore P/Es are high. Have to check if this relationship holds through the ages.
- fbelzile 6y agoLow interest rates definitely helped in the last few decades. Recently, yields have been rising though, which created some choppiness in the market. I think one of the main reasons the market hasn't responded in a big way yet is money supply: https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL The money being printed has got to go somewhere and a 1% return in the stock market (with high PE) is still worth more than a negative real rate accounting for inflation.