S&P 500 index p/e ratio chart:
This chart shows historical P/E Ratios for the S&P 500. Over the last 20 years the S&P 500 has tended to bottom at a rolling P/E Ratio of 15. This offers a clear picture of where valuations stand today.
10 yr. U.S. Government yield chart:
The chart below hit a high of 13.92% in 1981 and a low of 1.80% in 2012 on a yearly basis. The overall picture appears that interest rates need to see further consolidation. 10 and 20 year Moving Averages have not crossed. This would indicate that we have yet to witness a major reversal in interest rates. Stay tuned.
Global oil markets chart:
Supply vs. Demand
The chart below shows data from the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA). What this shows is that global supply is only .01% over global demand Place this in to perspective - there really is not a global oversupply in the oil markets. By decade end, more production will need to come online in order to prevent an imbalance. Whether projects are able to be delivered by this time is not certain. This could produce a risk to price spikes for oil.
historical interest rates after a crisis:
A bottoming formation in the US 10 yr. Government Bond is following prior patterns seen both in the U.S. and Japan following past crises. Two Hundred and Fifty years of interest rate data confirms this theory, as bottoms usually take years to form versus tops that are sharp in nature when they peak. Current Taylor Rule indicates that rates should be 2.97%.
Real Rates of Return:
Long term Real Rates of Return (10yr. Treasury Bond - Inflation) have been generally declining for 39 years. Currently the United States Real Rate of Return is .34%. Globally that number is -.65%.
Long-Term Inflation data dating back from 1774
Two Hundred and Forty-Five years of data show that historic inflation averages 1.66%. 30 year cycles appear present. This would indicate that the bottom of our declining rate of inflation happened in 2018. 2025 is when estimated inflation trends cross and would thus imply a structural change in trend.
G-SIBI's (Global Systemically Important Banks):
A positive year for 2018. $11 trillion in assets need to be sold compared with approximately $876 billion in equity that needs to be added to the list of 29 G-SIBI’s. This is a reduction of $76 billion from a year ago. For another year in a row, France and Japan will need to make the most headway in adding capital to their banks in the years to come.
Capital needed per country:
France, Japan, Canada, Spain, and Switzerland have the most to consider in how they raise capital in relation to their economic footprint. Expect to see equity to increase on company balance sheets during 2019-2021.
This chart is one of the best indicators of where valuations in the equity market present themselves. Central Bank money printing (currently spearheaded by the ECB) is having a dramatic cause and effect relationship with all global asset classes. Shaw Group expects another $1 trillion will be printed in the next 4 years. This could increase total market of all assets by ~4%.
The chart below hit a high of 1.512% in 2000. The current indicator stands at 1.359%.
The World bank gdp annual growth data:
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We share our insight regarding global capital markets and investment themes via proprietary analysis.