But here is a chart which seems to say that stocks are still overvalued relative to interest rates, unless one can make a case for a secular uptrend in valuations (which certainly looks like it has happened, though I'm not sure why).
doesn't the argument that the stock market is fairly valued based on the current level of interest rates lose its support when you look at japan and what happened to interest rates and the stock market there?
The S&P p/e versus bond yields sounds a lot like the "fed model" that used to be mentioned frequently on this thread. The idea being that rallies couldn't get much momentum if the aggregate p/e was over the safer bond yield. Does anyone know what the fed model says today about valuations?
If the ratio of p/e to bonds is more important than actual p/e than we may never see the ultra low p/es of <10 that have characterized other bear markets.
It also says that if interest rates rise a lot, that should slam the brakes on any stock market move. We are in uncharted territory here with record low interest rates so it is hard to say what will happen. I doubt that they are sustainable for long without causing some other economic dislocation, probably inflation.
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