The Dividend Cafe Monday - August 18, 2025
Aug 18, 2025
The podcast dives into the flat performance of major stock indexes amid significant geopolitical events. It examines historically low earnings yields in the S&P 500 while discussing a record surge in foreign investments. The impact of ongoing tariffs and legal challenges on the market is also highlighted, alongside insights into the energy sector and recent monetary policies. Listeners gain a thorough understanding of current economic indicators and the potential risks in investment strategies.
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Record Low Real Earnings Yield
- The S&P 500's real earnings yield is the lowest on record because index prices are very high, not because earnings or inflation expectations are weak.
- High prices in the denominator, not weak earnings, drive the historically low real earnings yield.
Valuations Look Stretched
- Price-to-book for the S&P is at an all-time high (5.3x) but is a flawed valuation gauge given intangible assets and changing index composition.
- Still, wide adoption of high revenue multiples (30% of market cap >10x revenue) signals elevated valuations to watch.
Record Foreign Buying Of US Stocks
- Markets were flat while foreign investors made a record net purchase of US stocks in June, buying $163 billion.
- That inflow supports US stock liquidity despite net negative foreign flows into Treasuries that month.