4 replies to this topic

[Charvo]

There seems to be a strong correlation with treasury interest rates and price to earnings multiples.  The lower rates go, the lower the price to earnings multiples on the stock market can go.  Here's a chart that reflects the 7 year treasury rate and the Dow P/E multiple at a pivot point.  The treasury interest rate rise has been actually rather mild, but it could be at the end of the rise.  However, that could also mean a ST stock market top.  If the ratio manages to go further downwards breaking the upward trend since the middle of 2014, then stocks could be in the midst of a really strong push up while interest rates continue on up for quite some time.

 

 

 

[redfoliage2]

I know many think DOW yield or SPX yield is the P/E ratio for the index.  But earnings only change once per quarter while the yield fluctuates constantly on the market.  So, it looks that in real time the yield is more dependent to interest rate than to earnings ........

 

Not a criticism, just something to discuss.

Edited by redfoliage2, 17 September 2016 - 08:18 AM.

[redfoliage2]

I should say that the yield as represented by !YIDDOW or !YLDSPX fluctuates daily on the chart, instead of "the yield fluctuates constantly on the market".

Edited by redfoliage2, 17 September 2016 - 08:29 AM.

[SilentOne]

Nice chart. I don't think I have ever looked at that kind chart closely enough.

 

I would prefer to look at the inverted version. The important lows here coincide with a 42 month cycle period, a fairly consistent cycle (~late 2005, 2009, mid-2012, 2016). The larger 7 year cycle low shows up at 2009 and now 2016.

 

So would you buy this chart? Coming out of a 42 month and 7 year cycle low, we should see upside for a good 2 years, say from Jan. 2016 into almost 2018.

 

cheers,

john

 

 

Edited by SilentOne, 17 September 2016 - 09:57 AM.

[Data]

Market prices are strongly correlated because of QE.