Two Metrics That Almost Perfectly Track S&P 500 Valuations

Ed Yardeni has two interesting charts on his blog today.  According to his analysis, forward valuations are tracking very closely with inflation expectations and consumers’ expectations for the future.

In his first chart, he overlays the S&P 500 forward P/E with expected inflation as implied by 10-yr Treasury Inflation-Protected Securities.

Yardeni S&P vs TIPS

Photo: Dr. Ed’s Blog

In his second chart, he overlays the S&P 500 forward P/E with the index of consumer expectations, a component of the Michigan Index of Consumer Sentiment.

Yardeni S&P vs expectations

Photo: Dr. Ed’s Blog

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