IYY - Negative Equity Risk Premium Estimates Persist For U.S. Equities

2024-03-26 09:15:00 ET

Summary

• The roaring US stock market has delivered red-hot gains in recent history but at the expense of future returns.
• The pushback is that artificial intelligence and related technology innovations have changed the calculus.
• From a calculated risk perspective, the case for incrementally adopting a defensive posture has a certain appeal, even if trend continues to make mincemeat of that decision.

The roaring US stock market has delivered red-hot gains in recent history but at the expense of future returns. That, at least, is one interpretation via earnings-yield and dividend-yield models that estimate the ex-ante equity risk premium (ERP). Based on a specific run of number crunching, this pair continues to estimate a negative ERP....

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