“Davidson” submits:
It is useful to note that the Value Investor Index does not adjust w/rates. It is based on long-term SP500 EPS and the Natural Rate (based on long-term economic fundamentals). The Natural Rate is based on the long-term Real Private GDP trend and a 12mo inflation measure. Many are using the 10yr Treas rate as a capitalization rate which comes from Greenspan’s Fed Model of years ago, but this would have the SP500 priced closer to ~$7,000 -$10,000 with rates 1.65% and a higher level of current earnings as opposed to the 4.94% of the Natural Rate using the historical long-term SP500 EPS median. The basis of the Value Investor Index is that it takes market psychology which has driven 10yr rates towards record lows out of the calculation.
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