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The economy is recovering: how to invest when everything is expensive?



The good news for your portfolio is that the economic recovery from Covid-19 appears to be true. The bad news is that financial assets have never been this expensive at the start of their recovery.

The stock market has eased concerns about rising bond yields and is hitting new highs as of Friday.The S&P 500 index is up 10 percent this year.

Analysts often compare stock prices with revenue-generating companies, which is what investors ultimately claim. Nobel laureate Robert Shiller used data dating back to 1871 to calculate the average price / income ratio over a decade adjusted for inflation to address the boom and decline of the economy, the so-called metric. Whether Shiller P / E or adjusted according to cycle P / E ratio (CAPE)

The S&P Composite 1

500 is trading at CAPE at 37, that is more than twice the historical average, although still less than the dot com bubble peak of 44.It reached 33 before the collapse in 1929.

The problem with “everything assembly” is that yes, everything is now expensive. Among stocks, even heavy cyclical industries like airlines are no longer cheap. And with record low interest rates and accelerating economic growth, bonds are also stretched. Treasurys can provide some value, but the 10-year yield is still below 1.7% on corporate bonds. He suggested, compared to the government paper, fell near the latest historic low.


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