Real Vision: Finance & Investing
Is the Stock Market Severely Mispriced? With Jesse Felder
Aug 30, 2023
Jesse Felder shares his outlook on the Federal Reserve and its policies, discusses the mispricing of the stock market based on various metrics, compares the bond market to the stock market and explores the potential impact of a 5% 10-year yield on stock markets. He also talks about the widening deficit in the US and potential inflationary challenges for the Federal Reserve.
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Quick takeaways
- The speaker believes that the stock market is severely mispriced, supported by metrics such as the lower dividend yield compared to 30-year tips yield and the higher price-to-earnings ratio than historical averages, suggesting overvaluation and potential risk.
- The significant divergence between stocks and bonds, with rising interest rates in the bond market while the stock market does not respond accordingly, indicates potential mispricing of stocks and the continuation of rising interest rates.
Deep dives
The Stock Market is Mispriced
The speaker believes that the stock market is seriously mispriced and provides various metrics to support this claim. For example, the dividend yield on the S&P 500 has not kept pace with the 30-year tips yield, suggesting that stock prices need to fall to raise the dividend yield. The stock bond ratio also indicates overbought conditions in the stock market. Additionally, the price-to-earnings ratio is higher than historical averages, indicating overvaluation. The speaker suggests that the macro indicators point towards a risk in earnings projections, and that there might be a continuation of the earnings recession. Overall, the speaker argues that the stock market is mispriced and poses a potential risk.
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