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