I did not comment on what to use to do DCF valuations. I just gave a fact that illustrates the comment that interest rates were moving up to 7% was by one metric already exceeded.
IMO the proper DCF rate is not as critical as using the same rate consistently for given time horizons.
IF you do that you can easily select the investment which will produce the highest expected return.
So, we should be using mortgage rates as an input in valuing equities?
It, along with other sectors hit by inflation, may mean less spare cash for luxury/electable items like cosmetic surgery, consumer goods, and new car sales.
Fewer people are looking to buy new homes, and that, along with an uptick in loan defaults, may impact banks at some point. So yes, it affects the equity market.
I’m just waiting for the commercial real estate market to crater due to high vacancy rates. I have no idea how that will play out, but there is no way I’m investing in a REIT focused on downtown office space. I know too many people thrilled with the work from home approach to think that will go away.
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