Natural Pinnacle To P/Es

Natural Pinnacle to P/Es

Four reasonable inflation scenarios, a pragmatic analysis, and the standard dividend discount model explain why there is a natural (rational) limit to price/earnings ratios in the stock market. These scenarios reinforce the empirical evidence graphically presented in the “Y Curve Effect.” When inflation permeates the economy, it adversely impacts stock market returns. This analysis is complemented by “Financial Physics” and “The Yield Curve, The Fed, & P/Es.”