Re:Money and Investing (1996)
by psadri on Tuesday March 30, 2021 @11:43AM
(#26635946)
It seems that interest rate x P/E is a ~constant. Interest rates are near historical lows and have been falling. Therefore P/Es are high. Have to check if this relationship holds through the ages.
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Low interest rates definitely helped in the last few decades. Recently, yields have been rising though, which created some choppiness in the market. I think one of the main reasons the market hasn't responded in a big way yet is money supply:
https://fred.stlouisfed.org/series/M1SL
The money being printed has got to go somewhere and a 1% return in the stock market (with high PE) is still worth more than a negative real rate accounting for inflation.