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Massively falling interest rates behind the stock market rise

So far the equity market is not really trading as the air is thin up here. There is rather an opposite “buy-the-dip” mentality. 

Whether it is the greater fool’s theory harder at work than ever before, the passive investing hegemony spreading everywhere or whether we are underestimating the risk willingness due to irresponsible central banking, we currently don’t know.

In retrospect, it is relatively clear that lower interest rates and ballooning central bank balance sheets put the equity markets on fire in 2019, but is the same trick possible also in 2020? 

A simple regression of potential growth (as a proxy for “g” in Gordon’s formula) and 10-year corporate bond yields basically says that S&P 500 forward P/E is at fair value. But the E forecasts are in our mind too high and we doubt rates will fall meaningfully from here.

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