How expensive are US equities versus their peers around the world? Compared to bonds? Commodities? Are there fundamental risks we can identify?
In the following presentation, Cantillon Consulting's Sean Corrigan answers all of the above and details what opportunities for better asset allocation might lie ahead...
Howver, deep in the presentation is an intriguing little chart.
As Sean Corrigan explains, if we superimpose the pattern of US Stock-to-Corporate Bond relative value from World War I to the end of World War II on the post-Berlin Wall data, we get a near-perfect overlap with the Crash of '29 corresponding to the Tech bust and the '37 slump to the Great Financial Crisis.
Were the somewhat spooky parallels to continue, 2020 would usher in a two-decade, 13% CAR stock outperformance over corporate bonds as enjoyed during the 50s and 60s.
Which, as Corrigan concludes, would be something to behold... and is probably the most bullish equity market analog we have seen yet.