Daily Spotlight: Asset Classes Still Near Equilibrium

Summary

Our stock/bond asset-allocation model, which we call the Stock Bond Barometer, is indicating that bonds are the asset class offering the most value at the current market juncture. But not by much. Our model takes into account current levels and forecasts of short-term and long-term government and corporate fixed-income yields, inflation, stock prices, GDP, and corporate earnings, among other factors. The output is expressed in terms of standard deviations to the mean, or sigma. The mean reading from the model, going back to 1960, is a modest premium for stocks, of 0.15 sigma, with a standard deviation of 0.97. In other words, stocks normally sell at a premium valuation. The current valuation level is a 0.28 sigma premium for stocks, just above the historical average but down sharply from 0.85 at the end of 3Q23. Other valuation measures also show reasonable multiples for stocks. The current forward P/E ratio for the S&P 500 is approximately 19, which is within the normal range of 13-24. The S&P 500 dividend yield of 1.4% is below the historical average of 2.9%, but up from an ultralow 1.2% in 2021. That current dividend yield is 28% of the 10-year Treasury bond yield, compared to the long-run average of 39% and the all-time low of 18% during 1999. Further, the gap between the S&P 500 earnings yield and t

EMEA Tribune is not involved in this news article, it is taken from our partners and or from the News Agencies. Copyright and Credit go to the News Agencies, email news@emeatribune.com Follow our WhatsApp verified Channel