FAST FIVE: US Equity Valuations Creep Into Dot-Com Bubble Territory For The First Time In 20 Years
Fiscal impulse is increasing with both China and the US increasing fiscal deficits.
United Kingdom will most likely increase spending next year under Boris Johnson as the new Conservative party is not a believer in austerity and balanced budgets.
It simply doesn't buy voters.
This is good for profit expectations in 2020 and the recovery phase in the economy is typically the best period for equities against bonds with an average 9.4% excess return for equities over the period.
But with more gains in equities come elevated equity valuations and especially US equity valuations look stretched, but more on that in January. With G7 10Y yield at 0.79% and global corporate bonds yield at 2.2% there is no attractive liquid alternative to equities. So for now enjoy the ride in equities and watch those rates.