DM Valuations Monitor Valuations unlikely to halt recovery in risky assets Despite talk of a bubble in “risky” assets, we do not think that their valuations are particularly stretched and will prevent them from gaining further ground over coming months. 10th July 2020 · 8 mins read
DM Valuations Monitor MSCI USA’s valuation most stretched since dot-com era The price/estimated earnings (P/E) ratio of the MSCI USA Index – a benchmark index of mid- and large-cap US equities – recently rose to its highest level since the dot-com era. Nonetheless, we still... 22nd April 2020 · 8 mins read
DM Valuations Monitor US dollar’s valuation won’t prevent it from rebounding While the dollar looks overvalued on most metrics, and has risen significantly over recent years, we don’t think that it is very overvalued. In our view, its valuation will not stop it from... 17th January 2020 · 8 mins read
DM Valuations Monitor Valuations of US equities likely to fall back We don’t expect the valuations of US equities to continue to rise over the rest of 2019. In fact, we expect the price/earnings (P/E) ratio of the S&P 500 to fall, and this is a key reason why we... 3rd October 2019 · 8 mins read
DM Valuations Monitor Valuations unlikely to keep supporting equities this year We do not think that the valuations of equities are unsustainably high. Nonetheless, we still expect that stock markets in the US and in the rest of the developed world will slump later this year... 7th June 2019 · 1 min read
DM Valuations Monitor End of QT unlikely to affect bond valuations much In his semi-annual testimony to Congress, Jerome Powell reiterated that the Fed is deciding how and when to end its balance sheet rundown. Although some officials have indicated that it could finish... 28th February 2019 · 1 min read
DM Valuations Monitor Italian BTPs will probably continue to trade like “junk” Although Italian government bonds (BTPs) are already trading like “junk”, we think that their credit spread will rise even further next year for several reasons. 28th November 2018 · 1 min read
DM Valuations Monitor Valuations don’t appear unsustainably high There is a widely-held view that the prices of many financial assets are bound to come crashing down sooner or later, because their valuations have risen far above the long-run averages to which they... 15th August 2018 · 1 min read
DM Valuations Monitor Why aren’t Treasuries benefiting from protectionism? Although US Treasuries might have been expected to benefit from the recent slump in the stock market, the 10-year yield has not changed much. By contrast, the 10-year German Bund yield has fallen... 26th March 2018 · 1 min read
DM Valuations Monitor Will a growing twin deficit drive the dollar even lower? The dollar’s weakness in the face of tighter Fed policy is reminiscent of the mid-2000s. At the time, interest rates and bond yields also moved in favour of the US, but its currency was dragged down... 23rd February 2018 · 1 min read
DM Valuations Monitor Just how overvalued is the US stock market now? Shiller’s cyclically-adjusted price/earnings (CAPE) ratio for the S&P 500 has climbed to around 32. The last time it rose to such a high level was in the late 1990s, shortly before equity prices in... 18th December 2017 · 1 min read
DM Valuations Monitor Will rising US bond yields ride to the dollar’s rescue? For most of this year, the dollar’s value against other “majors” has tracked the gap between 10-year government bond yields in the US and the countries where these other currencies are issued. However... 29th November 2017 · 1 min read
DM Valuations Monitor Lower interest rates underpin higher asset valuations US FOMC participants’ median estimate of the level of the federal funds rate in the “longer run” has fallen by 25bp, to a new low of 2.75%. This compares to a median estimate of 4.25% in early 2012... 21st September 2017 · 1 min read
DM Valuations Monitor Do valuations point to a re-run of 2007? A decade after the start of the global financial crisis (GFC), some are of the view that history may be about to repeat itself, given the similarly-high valuations of equities and corporate bonds in... 16th August 2017 · 1 min read
DM Valuations Monitor Are bond “bubbles” bursting? Although the yields of government bonds remain very low compared to their averages since the early 1980s (see Chart below), this does not imply that their valuations are still extremely inflated, as... 19th July 2017 · 1 min read
DM Valuations Monitor Do lower risk-free rates justify higher share prices? The bears claim that US equities will hit the skids soon because Shiller’s cyclically-adjusted price/earnings ratio (CAPE) for the S&P Composite is now more than double its average since 1881 of 14... 23rd June 2017 · 1 min read
