Sky-High Equity Valuations, High Yield Defaults Projected to Peak in Q1, and Could Inflation Growth Be On the Horizon?
December 4, 2020 | FIRESIDE CHARTS
Equities are flashing yet another reminder of the dotcom era. As indices hover around record highs, the S&P® Index CAPE Ratio—or Shiller P/E—has reached territory only seen three times in history. Are we due for a pullback? Meanwhile, risk is climbing in the high yield market; defaults are expected to peak next quarter and some longer-term forecasts have them climbing above Great Recession levels. Copper meanwhile has climbed to a seven-year high as the sinking USD pushes commodity prices higher. Will those climbing prices, in combination with long-awaited Covid vaccine distribution, be enough to spark inflation?
1. An orderly pullback would be a welcome way to extend this rally. More and more measures are showing the markets are approaching extreme euphoria and valuations…
Source: The Daily Shot, from 12/3/20
2. HY investors take note:
Source: The Daily Shot, from 12/4/20
3. A sinking USD is helping commodity prices rise. Here is “Dr. Copper”. Will this trend persist enough to spark some inflation?
Source: The Daily Shot, from 12/4/20
4. German 10-year TIPS counterparts now have a negative 1.5% yield. Yes, you pay ~1.5%/year for the Government to hold your money for 10 years. This is not rational unless inflation “explodes”…
Source: The Daily Shot, from 12/4/20
5. This inflation worry trend is in the U.S. TIPS market as well:
Source: The Daily Shot, from 12/4/20
6. The uneven spread of the first two Covid waves has now converged into a national ” wave”. The Thanksgiving “surge on a surge” is still pending. Stay safe!
Source: JHU CSSE, as of 12/4/20
7. Perspective: California alone now has more daily cases than the entire country did in March.
Source: JHU CSSE, as of 12/4/20
8. A new look at the data:
Source: The COVID Tracking Project, as of 12/2/20
9. FYI when they get here:
Source: Statista, from 12/3/20
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.