Financial Physics

Updated
Through Dec 2020

Financial Physics Presentation

This presentation introduces the core “Financial Physics” model. The key factors include Real GDP, Inflation, Nominal GDP, Earnings Per Share (EPS), and P/E Ratio. Since Real GDP has been relatively constant over extended periods of time and all other factors are driven by inflation, a primary driver of the stock market is inflation — as it trends toward or away from price stability. Given the current state of low inflation and the likelihood of it either rising (inflation) or declining (deflation), P/E ratios are expected to decline, in general, for a number of years. As P/E ratios decline and EPS grows, the result will be another relatively nondirectional secular bear market.

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