- The Big Picture - http://www.ritholtz.com/blog -
Chart of the Week: Stock versus Bond Yield
Posted By Barry Ritholtz On January 10, 2005 @ 11:06 am In Markets | Comments Disabled
Despite the increase in stock prices since the summer, equities now look even cheaper against corporates, due to the strength in the corporate bond market, according to Brian Reynolds . The ratio of stock yield versus corp bond yield on 8/04 had stretched valuation measures between them to the widest levels since after the ’87 crash (using a Fed model variation), Reynolds says.
Stocks versus Bond Yield
click for larger chart
source: MS Howell & Co. 
He cautions, however, that cheap looking equities are no guarantee of price rises. The wide swings in these series reveal little correlation between stocks and bond yields. Wide disparities in valuations can reveal when buyers are becoming too aggressive in one asset class or the other.
Two Big Reasons to Stay Bullish on Stocks in 2005  (for balance)
Quote of the Day:
“When everybody starts looking really smart, and not realizing that a lot of it was luck, I get scared.” -Raphael Yavneh
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2005/01/chart-of-the-week-stock-versus-bond-yield/
URLs in this post:
 Brian Reynolds: http://www.capmarketsinfo.com/ViewFile.asp?ID1=21406&ID2=36691801&ssid=1&directory=6571&filename=EquitiesStill_Cheap_1.10.2005.pdf
 Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/stock_yield_as_a_percentage_of_bond_yiel.jpg
 Seeking the Unfairly Undervalued: http://www.washingtonpost.com/ac2/wp-dyn/A58309-2005Jan8?language=printer
 Two Big Reasons to Stay Bullish on Stocks in 2005: http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_currier&sid=atswfFRWeYQc
 Love, Hate and Mutual Funds: http://biz.yahoo.com/rb/050109/column_funds_2.html
 Newspapers Baffled by Declines: http://www.pcmag.com/article2/0,1759,1747313,00.asp
 You may be a bad driver and not know it: http://moneycentral.msn.com/content/Insurance/Insureyourcar/P105598.asp
 Everything You Always Wanted To Know About Sleep: http://circadiana.blogspot.com/2005/01/everything-you-always-wanted-to-know.html
Copyright © 2008 The Big Picture. All rights reserved.