Musings on Markets

MAY 6, 2022

There are three possible explanations for the divergence: Short term versus Long term : The consumer survey extracts an expectation of inflation in the near term, whereas the treasury markets are providing a longer term perspective, since I am using ten-year rates to derive the market-implied inflation.

Risk Premium

Musings on Markets

JANUARY 21, 2023

trillion on their market capitalization at the end of 2019. The first is that the use of historical risk premiums is predicated on the belief that the future will look like the past, and the world, in all its dimensions, has changed dramatically over the last few decades. During the course of 2022, US equities collectively lost $11.6

Equity

ThomsonReuters

MAY 6, 2021

Discounted cash flow approaches are also utilized within other functions of an organization, such as treasury, budgeting, financial planning and analysis, and tax planning. The Codification often provides guidance on how to select a discount rate for a particular area of accounting. Understanding the Calculation and the Output.

Discounted Cash Flow

Musings on Markets

MAY 24, 2021

Interest rates : To understand the link between expected inflation and interest rates, consider the Fisher equation, where a nominal riskfree interest rate (which is what treasury bond rates) can be broken down into expected inflation and expected real interest rate components.

Treasury

Musings on Markets

JANUARY 19, 2022

In a post at the start of 2021 , I argued that while stocks entered the year at elevated levels, especially on historic metrics (such as PE ratios), they were priced to deliver reasonable returns, relative to very low risk free rates (with the treasury bond rate at 0.93% at the start of 2021).

Risk Premium