3 reasons why investing now is better than in the go-go days of 2021 fpinvesting
Negative real yields run counter to economic theory, but there were a few noteworthy periods when they persisted. Bond holders suffered in the 1970s when yields didn’t keep up with spiralling inflation. Interest rates rose, but real yields were still negative. That happened again in 2019, but for a different reason. Central banks pushed interest rates down near zero to stimulate the economy .
Fortunately, recent data suggests inflation is starting to decline, although it will be months before we know if buying a five-per-cent bond was a good purchase or not. I’m betting it will be.Prior to last year, P/E multiples were running well above their historical range. Starting from a peak in the summer of 2021, however, the broad market P/E dropped to its long-term average of 16x from the low 20s.
First, I think profits will hold up better than the recession doomsayers suggest. Sales volumes are likely to fall, but some of the cost headwinds corporations are facing — labour shortages, supply chain challenges, high input prices and a strong United States dollar — will abate, too. And, whether we like it or not, many industries are highly concentrated and are more co-operative than competitive.
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