Search Results for: premium

10-Year U.S. Treasury Yield Less CPI Given investors’ historic tendency to demand a 200 basis point premium over inflation rates, could rates rise further? Image: Morgan Stanley Wealth Management

S&P 500 ERP and S&P 500 Fwd vs. Trailing EPS The S&P 500 looks unattractive until the equity risk premium increases. Image: Morgan Stanley Research

Implied Volatility (VIX) and Realized S&P 500 Volatility (1-Month) According to Goldman Sachs, the volatility risk premium will return toward 2021’s highs in the coming weeks. Image: Goldman Sachs Global Investment Research

Valuation – 12-Month Forward P/E of Top vs. Bottom Quintile Does valuation still matter? The premium of the 20% most expensive companies is near highs. Image: Goldman Sachs Global Investment Research

Cross-Asset Valuations on their 10-Year Range Equity risk premiums suggest that equities are still cheaper than average. Image: Morgan Stanley Research

U.S. Financial Conditions Relative to the low VIX and favourable financial conditions, the equity risk premium remains quite high. Image: Fidelity Investments

Relative P/E Valuation of Stable Growth vs. Variable Growth S&P 500 Companies Investors are paying a huge premium for stable growth S&P 500 companies vs. variable growth companies. Image: Goldman Sachs Global Investment Research

U.S. Rates Chart showing the dramatic plunge in interest rates over the past 10 months. On the positive side, the equity risk premium (ERP) is now higher. Image: Fidelity Investments

Why Lower Bond Yields Influence the S&P 500? Because lower interest rates push stock market multiples higher.  If interest rates are lower, then the value of future cash flows increases, because future cash flows are discounted back at a lower interest rate. So, lower U.S. 10-year yields influence the stock market equity risk premium. On the other…