DM Valuations Monitor US Treasuries look overvalued, given policy outlook A lot of attention has focussed recently on the possible effect on US government bonds of a reduction in the size of the Fed’s balance sheet. While we expect the reduction to be gradual, we don’t... 26th May 2017 · 1 min read
DM Valuations Monitor Do stretched valuations signal trouble ahead? The valuations of many assets have rarely been as high as they are now. When they have reached such levels in the past, sharp falls have often followed. This suggests that there is a significant risk... 23rd March 2017 · 1 min read
DM Valuations Monitor Is low volatility a bad omen for the S&P 500? Having traded sideways in January, strong economic data and growing anticipation of major tax reform have since driven the S&P 500 higher. Indeed, the index has risen by more than 3% since the start... 23rd February 2017 · 1 min read
DM Valuations Monitor Is the US stock market in a bubble? Although the S&P 500 has risen to a record high in the wake of Donald Trump’s victory, we do not think that it is in a bubble. Admittedly, its price/earnings ratio is now about double the long-run... 16th December 2016 · 1 min read
DM Valuations Monitor What’s behind the surge in Treasury yields? The rout in the US bond market since the elections there is a logical response to the prospect of a substantial fiscal expansion. Indeed, the results have prompted us to revise up our already-bearish... 15th November 2016 · 1 min read
DM Valuations Monitor Is sterling now “fair” value? Although sterling has fallen a long way since the vote for Brexit, the IMF’s latest forecasts for the UK’s current account balance suggest that there is no fundamental reason for it to bounce back... 21st October 2016 · 1 min read
DM Valuations Monitor Are valuations really stretched? Although the valuations of many assets are higher than their long-run averages, we don’t think sharp falls in their prices are likely. This is because we believe their equilibrium valuations have... 13th September 2016 · 1 min read
DM Valuations Monitor Will term premiums anchor US Treasury yields? The term premiums of US government bonds – the parts of their yields that do not capture expectations for short-term interest rates – are unusually low. Indeed, according to the estimates of some Fed... 19th August 2016 · 1 min read
DM Valuations Monitor Will the plunge in UK gilt yields last? In the wake of the UK’s vote for Brexit on 23rd June, long-term government bond yields have fallen further there than in other developed countries. (See Chart below.) Indeed, the 10-year Gilt yield... 15th July 2016 · 1 min read
DM Valuations Monitor Is average normal for US equities? The bears’ argument that the valuation of the US stock market is unsustainably high is typically made by comparing the current level of Shiller’s cyclically-adjusted price/earnings ratio (CAPE) for... 17th June 2016 · 1 min read
DM Valuations Monitor Will its overvaluation prevent the US dollar from rising? The real trade-weighted value of the US dollar remains well above its average and trend levels of the last ten years. This suggests that the currency may still be fundamentally overvalued after its... 16th May 2016 · 1 min read
DM Valuations Monitor US equity valuations still not that stretched The US stock market has fared well over the past month, with the S&P 500 now not far below its record high. Admittedly, many observers continue to predict that the index will slump again at some point... 19th April 2016 · 1 min read
DM Valuations Monitor What to make of the rebound in inflation compensation? The gap between the nominal yield of 10-year conventional US Treasuries and the real yield of 10-year US TIPS has rebounded over the past month. This increase in inflation compensation could... 18th March 2016 · 1 min read
DM Valuations Monitor Are euro-zone peripheral government bonds overvalued? Although euro-zone peripheral government bonds still appear overvalued even after their poor performance over the past month, we wouldn’t be surprised if their valuations remained quite stretched... 18th February 2016 · 1 min read
DM Valuations Monitor Sterling still looks overvalued Sterling has been amongst the worst performing major currencies over the last month, falling by a similar amount as the Canadian, Australian and New Zealand dollars, which have all been hit by the... 21st January 2016 · 1 min read
DM Valuations Monitor Equities well placed to cope with further Fed tightening The US stock market has reacted positively to the first rate hike by the Fed, and we don’t expect it to be derailed by the onset of further tightening. Admittedly, at around 4%, the cyclically... 17th December 2015 · 1 min read