Something happening here, what it is ain’t exactly clear
New records today in the stock market. The over-valuation level now is close to the highest ever. So yields now are close to the lowest ever (price and yield vary inversely).
Over the modern history of finance capitalism (1880 to present) bond yields and the dividend yield of stocks have consistently fallen — from 6% to 2%.
Obviously they can’t go much lower. They can’t go to zero or there would be no investment at all.
I guess they can go to 1%, but what would it mean regarding the fate of the system to think that expected investment returns are just about negligible?
Pension funds depend upon at least 5% of yield to be able to meet their obligations.
How can the trendline possibly keep falling?