The “equity risk premium” is the compensation investors receive *over and above the risk free rate* for taking on equity risk.
But it’s not always positive, and there have been times when this spread goes to zero or even negative . It is a forward-looking equity risk premium. The expected returns cover a 5-10-year projection period and is usually used by asset allocators for analyzing strategic asset allocations. But if you look at the chart there’s a couple of interesting tactical insights that have also been revealed.
So whether you’re looking at it from a tactical or strategic perspective, there is a clear warning and prompt to rethink asset allocation right here.CONTINUED: What About the Rest of the World?
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