Quantitative Research and Analytics Three Dogs That Did Not Bark: Risk Premia and Stock Market Shocks
Executive Summary Thereʼs a bone of contention among investors: Are U.S. equity values about right or far too high? Based on the equity risk premium, stocks are either marginally expensive or fairly valued (depending on the data window). Yet standard valuation ratios – such as market capitalization-to-GDP, Tobin’s Q, CAPE and market cap-to-corporate profits – suggest stock prices are severely inflated. Equity values are vulnerable to three types of risk premia: the conventional equity risk premium, the risk of monetary tightening and the prospect of decreasing inequality. Download PDF For an abridged version of this article, read our blog post, “U.S. Equity Values: The Three Dogs That Have Not Barked.”
Blog Cyclical Outlook Key Takeaways: Strained Markets, Strong Bonds High quality fixed income investments can help center portfolios while offering attractive yield potential amid a likely recession in 2023.
Cyclical outlook Strained Markets, Strong Bonds Resilient assets with attractive yields can help portfolios stay centered in 2023, when we expect inflation to moderate, central bank policy to steady, and a recession to take hold.