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The Price of Risk: With Equity Risk Premiums, Caveat Emptor!

Musings on Markets

If you have been reading my posts, you know that I have an obsession with equity risk premiums, which I believe lie at the center of almost every substantive debate in markets and investing. That said, I don't blame you, if are confused not only about how I estimate this premium, but what it measures.

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Data Update 2 for 2023: A Rocky Year for Equities!

Musings on Markets

In this post, I will begin by chronicling the damage done to equities during 2022, before putting the year in historical context, and then examine how developments during the year have affected expectations for the future. Actual Returns Your returns on equities come in one of two forms. Stocks: The What?

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Sovereign Ratings, Default Risk and Markets: The Moody's Downgrade Aftermath!

Musings on Markets

For more than a decade, S&P remained the outlier, but in 2023, Fitch joined it by also downgrading the US from AAA to AA+ , citing the same reasons. Sovereign Defaults: A History Through time, governments have often been dependent on debt to finance themselves, some in the local currency and much in a foreign currency.

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Data Update 4 for 2023: Country Risk - Measures and Implications

Musings on Markets

A few weeks ago, I posted my first data update pulling together what I had learned from looking at the data in 2023, and promised many more on the topic. In the month since, I have added two more data updates, one on US equities and one on interest rates , but my attention was drawn away by other interesting stories.

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Market Resilience or Investors In Denial? A Mid-year Assessment for 2023!

Musings on Markets

I am just not good at it, and the first six months of 2023 illustrate why market timing is often the impossible dream, something that every investor aspires to be successful at, but very few succeed on a consistent basis. Markets, as is their wont, live to surprise, and the first six months of 2023 has wrong-footed the experts (again).

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Data Update 1 for 2025: The Draw (and Danger) of Data

Musings on Markets

Thus, as you peruse my historical data on implied equity risk premiums or PE ratios for the S&P 500 over time, you may be tempted to compute averages and use them in your investment strategies, or use my industry averages for debt ratios and pricing multiples as the target for every company in the peer group, but you should hold back.

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Data Update 3 for 2023: Inflation and Interest Rates

Musings on Markets

If 2022 was an unsettling year for equities, as I noted in my second data post, it was an even more tumultuous year for the bond market. Historical Context In my earlier post, I noted that US equity market performance in 2022 made it the seventh worst year in stock market history, if you go back to 1928.