> The trailing (!) S&P P/E is greater than 20 right now. The Fed is supporting prices above their historical mean/median of 15. It makes zero sense, from a financial standpoint, unless the market is pricing in substantial inflation.
No, it's just pricing in low returns across all asset classes (to simplify, low interest rates) - assets are priced by excess returns not absolute.
There's nothing unreasonable about a P/E over historical norms if you think interest rates will continue to stay well below historical norms.
It is paradoxical that a sputtering economy can make equities worth more cheeseburgers, rather than fewer, but I see the logic. At some point, given the choice between a low-yielding equity and a cheeseburger, I'd rather have the cheeseburger.
Exactly. The thing people may also forget who have a long time horizon is that this is actually a bad thing. Returns are likely historically low going forward which is bad for your future retirement.
>> Returns are likely historically low going forward which is bad for your future retirement.
For sure. People are not factoring in the long-term interest rate here - they should look at the risk-free T-bill rates in the 1980s and how equities performed against them, and what we're looking at as well.
No, it's just pricing in low returns across all asset classes (to simplify, low interest rates) - assets are priced by excess returns not absolute.
There's nothing unreasonable about a P/E over historical norms if you think interest rates will continue to stay well below historical norms.