There's no silver bullet, but here are 5 ways that might show where the market is headed

  • 📰 fpinvesting
  • ⏱ Reading Time:
  • 62 sec. here
  • 3 min. at publisher
  • 📊 Quality Score:
  • News: 28%
  • Publisher: 63%

Nigeria News News

Nigeria Nigeria Latest News,Nigeria Nigeria Headlines

Investors may want to resist the temptation to add exposure and chase 2023’s rebound. Find out more.

Valuation, voting and weighing

To be clear, valuations have little bearing on the performance of stocks over the short term. But their ability to predict returns over longer holding periods has been more pronounced. As Buffett once said, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”

The combination of elevated valuations and further tightening by the Fed has caused the earnings yield of the S&P 500 to fall below the Fed funds rate, pushing market psychology from TARA to TIAGA . The S&P 500 has on average produced a real return of 9.3 per cent over the subsequent 12 months after the difference between 10-year U.S. Treasury yields and the Fed funds rate fell within the top quintile of the historical distribution . This contrasts with an average of minus 0.4 per cent when this spread has been in the bottom quintile .Article content

Given the strong historical connection between inverted curves and subsequent recessions, it follows that there is a distinct possibility of a recession occurring in the near term. Moreover, above-average valuations imply that equities are not materially discounting an economic contraction and an associated decline in company earnings.

 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.
We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 43. in NG

Nigeria Nigeria Latest News, Nigeria Nigeria Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Investors should take on more risk in this market: Portfolio manager - BNN BloombergSigns of cooling U.S. inflation has one portfolio manager calling for investors to take on more risks in the equities and bond market.
Source: BNNBloomberg - 🏆 83. / 50 Read more »

Sensing end of Fed hikes, some U.S. investors return to dividend stocksThere’s a search for opportunities for income if Treasury yields head lower.
Source: globeandmail - 🏆 5. / 92 Read more »