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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (15167)	12/1/2002 5:40:28 PM
From: Shack	Read Replies (1) \| Respond to of 19219

Excellent points Grace and a must read post. Personally I don't think the bond rally is over quite yet. Bond funds are still generating returns higher than inflation and I think will continue to draw in cash (notwithstanding the recent sell-off). The question for me is what combination of S&P earnings multiple and risk free rate of return do we need to see a secular bull begin? I'm interested in your thoughts here. With a forward PE still over 30 for the S&P, I think we will either need to see the yield on the 10-year note drop below 3%, or we will need to see a large increase in corporate earnings to get that multiple lower. The latter shows absolutely no signs of occuring as of yet. IMO the mix right now still favours bonds, but you make a great point for the bears who are looking for single digit P/E's on equities. In the current interest rate environment I don't see it happening, but I still demand a lower multiple than we are seeing.