According to the Fed model for evaluating equities, the S&P 500 is fairly valued at 7500 (conservatively).

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by trollhard9000

According to the Wikipedia entry for the Fed model for evaluating equities:

In its strongest form the Fed model states that bond and stock market are in equilibrium, and fairly valued, when the one-year forward-looking earnings yield equals the 10-year Treasury note yield

The 10 yr is currently trading at 0.67%, which translates to a P/E of ~150. In 2019 the S&P 500 earned $157 per share. Let’s guess (conservatively) that earnings fall to $50 per share in 2020. The S&P should trade at 7500 to reach parity with the Fed model for evaluating equities.

You’re welcome.



Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.


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