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To: Rascal who wrote (17532)5/18/1999 4:20:00 PM
From: PAL  Read Replies (1) | Respond to of 41369
 
The reason techs will suffer if interet rate rises is because techs have high P/E. If you reverse P/E to E/P, you get earnings yield. For example if you have a P/E of 50, then E/P (earnings yield) is 0.02 or 2%. Investor will then compare this to bond yield of 5.9%, making earnings yield by tech not that attractive. Defensive stocks have low P/E, making the earnings yield more appealing.

Paul


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