DM Monthly Report – May 2019

IS THERE A RELATIONSHIP BETWEEN INTERST RATES & STOCK VALUATIONS?  In last month’s missive, we tackled the topic of persistently low interest rates and gave our theories as to why yields have not tracked the significant economic recovery from the depths of 2009. Understandably, this anemic backdrop imparts a direct impact on expected bond performance, but should it also influence how we think about stocks? In a recent interview, Warren Buffet said, “I think stocks are ridiculously cheap, if you think that 3% on 30-year treasury bonds makes sense”. Buffet wasn’t saying that corporate earnings are about to explode or that companies are going to double their dividend payouts, but was instead suggesting that relative to their primary alternative, the expected return for stocks (and hence their current valuation) looks compelling.

Click here to read more:   DM-Monthly-Report-May-19