• Are Stocks Cheap Yet? Refer To The Cyclically Adjusted Earnings Yield For Perspective

  • Aug 14 2024
  • Length: 10 mins
  • Podcast

Are Stocks Cheap Yet? Refer To The Cyclically Adjusted Earnings Yield For Perspective

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  • Summary

  • As discussed in detail last summer (see Research Highlights and Forbes article), comparing the Earnings Yield on stocks (using the S&P 500 Cyclically Adjusted Earnings Yield [CAEY]) to the Risk-Free Yields on U.S. Treasury Bonds can have an elucidating effect on an investor's favor towards equities or away from them.

    Recall that Earnings Yield is equal to Earnings Per Share divided by its Stock Share Price. By simply inverting the Price-to-Earnings (PE) Ratio, you attain the Earnings Yield, which standardizes a stock's attractiveness as a cash flow instrument (typically stocks are bought for capital growth or dividend yield or some combination thereof) relative to other cash flows instruments (typically bonds for fixed income purposes).

    Updated Research Highlight with data referenced in this episode found at: https://www.alignewealth.com/blog/research-highlights-08-07-2024

    Copyright © 2024 Ivan Illan, AWAIM®
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