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Strategies & Market Trends : Sharck Soup
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To: Softechie who wrote (35927)9/21/2001 3:08:59 PM
From: puborectalis   of 37746
 
Then there are interest rates, which are much lower today than in the past. Indeed, you have to go back to the Eisenhower era of the 1950s to find three-month Treasury bill rates as low as they are today.

And if the Federal Reserve cuts its federal funds rate again, as is widely expected ( see our forecast page), these yields will go even lower.

Yields on 10-year Treasuries are now close to 4 1/2 percent; last year at this time they were 5.8 percent.

This means the ratio of the earnings yield on the S&P 500 (i.e., the reciprocal of the p/e) to the yield on the 10-year Treasury is now at one of its lowest points since the end of the 1981-82 recession.

Since there are huge pools of funds sitting in money-market accounts earning next to nothing, it's only a matter of time before investors realize that the costs of being risk-averse are outweighed by what could well be a great buying opportunity.
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