That has come at a time when the S&P 500 is trading at 22 times forward earnings, which is in the 99th percentile since 1976, according to Goldman, suggesting that the valuations could be a threat particularly in a rising-rate environment.Comparing the S&P 500 divided yield with the 10-year yield shows valuations only in a midrange – around the 42nd percentile.
"Unsurprisingly, these cyclical stocks have been positively correlated with both nominal and real interest rates," Kostin wrote. "In contrast, the ultra long-duration stocks have been negatively correlated with interest rates given they generate no earnings today and their valuations depend entirely on future growth prospects."
He said rates won't pose a significant danger to stocks until the 10-year hits 2.1%. For now, the environment of rising yields along with growth is "consistent" with the firm's 4,300 S&P 500 price target for 2021, a forecast that implies 13% growth from Friday's close. "Looking forward, investors must balance the appeal of promising businesses with the risk that rates rise further and the recent rotation continues," Kostin said. "Although secular growth stocks may remain the most appealing investments on a long-term horizon, those stocks will underperform more cyclical firms in the short-term if economic acceleration and inflation continue to lift interest rates.
kevinolearytv Mr Common Sense
kevinolearytv Airlines were struggling before Covid, we'll likely see a bump because of frustration due to lock down, but in no way will it magically save the industry. Especially if companies look to implement more WFH options, and business travel takes a big decline.
kevinolearytv Who named him Mr Wonderful?
kevinolearytv Do you think this is what people really need right now?
kevinolearytv Another out-of-touch boomer that doesn't get it. I'll be making up for lost time once I am vaccinated and can travel. Plenty of money saved up to do so.
michaelsantoli CNBC is trying to make sure tomorrow is a red day
michaelsantoli Spend your money in Art
michaelsantoli If companies repatriate another $8 trillion over the next 4 years.
michaelsantoli I thought we were rotating to value? I can't keep up.
michaelsantoli It's boring to sit at home alone, looking for someone to spend time with
michaelsantoli every stock is a growth stock! 2-3% a day every day!
kevinolearytv I've been known to change the course of mighty rivers with my bare hands; nothing makes me skittish. So, to NOT be long AAL is to be as averse and afraid of risk/reward as hydrophobic sand is of water....
kevinolearytv I stopped listening to anything this guy had to say after the boat accident.
kevinolearytv Stimulus: Fed has only 3 tools (debt, print $, negative rates), and no exit plan (reversing any of the 3 kills stock market). Inflation destroys purchasing power of your savings. Fight the Fed and the crony banks. Help silversqueeze go viral. Join
kevinolearytv It mean long airlines