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Bloomberg: ASR bond/ equity yield ratios going back to 1910 – implications

Beth McCann

4th NOV. 2022

John Authers cites an ASR chart (with numbers as of Oct. 31 - before the central bank meetings) suggesting that “it’s scarcely tenable to hold stocks rather than bonds…"

Using numbers going back to 1910, this ASR chart shows the relative valuations of stocks and bonds in the US, measured in standard deviations.

“So, on the eve of the Fed giving everyone a powerful incentive to sell stocks, the premium to buy them rather than bonds was almost 3.5 standard deviations above a norm going back 112 years. The numbers for global bonds and stocks don’t go back so far, but also suggest that this might be a good time to get out of stocks. The only time in the last 40 years when stocks looked this overvalued relative to bonds was at the end of September 1987, on the eve of the Black Monday crash”…. “After a few weeks of optimism, things look dire for stocks once more. During Wednesday’s press conference, it seemed as though Powell wanted to squelch the latest bear market rally. It’s hard to see how he could have done so more effectively”…

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