Taps Coogan – October 19th, 2023
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The equity risk premium, as defined by forward earnings, is fast approaching zero and its lowest levels since 2003/2004. Via the Daily Shot:
The S&P 500 equity risk premium is nearing zero for the first time in over two decades. pic.twitter.com/tmXeSWRFKw
— (((The Daily Shot))) (@SoberLook) October 18, 2023
This indicator has never been a good timing measure for stocks; it has too many compound ratio embedded within it. It does, however, highlight that equity valuations don’t make much sense given their anticipated earnings as compared to the ‘risk free’ rate. That all fits nicely into our long standing view that risks assets have been, and are likely to remain, range bound between the 2021 highs and 2022 lows for the foreseeable future.
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