A Favorable Fundamental Background… Byron Wien

Byron Wien, Blackstone, opines on the stock market, here…

“Putting all of this together, the conclusion is that there is a favorable fundamental background for the financial markets. We continue to believe earnings and interest rates will be the critical factors. On a dividend discount model basis, which projects the level of the market based on earnings and interest rates, the S&P 500 could trade well above 3000, but other valuation models rate the index more fully priced. Low interest rates have resulted in a very high equity risk premium. Earnings yield, however, is well above the 10-year Treasury percentage return. Trying to balance all of these factors, our conclusion is that there is limited opportunity in the overall developed markets right now but, while the possibility of sharp corrections is always there, the probability of a bear market any time soon is small.”