These charts tell the whole story regarding the current state of the global economy and investment markets:
- Global central bank asset purchases compared to global equity % change (let’s be honest, there’s only one thing that matters…)
- Deutsche Bank’s recent report on the current stock market rally (’12 to ’16) compared to past market climbs (Equity Risk Premium (ERP) is the difference between stock earnings yield and the yield on the US treasury bond)
- Japanese interest rates vs. forward P/E ratio (low rates don’t stimulate the economy, growth and inflation – they create a drag, for numerous reasons, at the expense of savers which will inevitably lead to lower valuation multiples in stocks (as is reflected by Japanese stocks))
Hopefully this puts the whole “chase for yield” in perspective.
Nick