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Morgan Stanley: risk-reward ratio in the US stock market is extremely unattractive

Forward Yield to Earnings Ratio S&P 500 to break even inflation (in basis points). Source: Bloomberg

Investors in the stock market get too little for the level of risk they take, said Mike Wilson, chief strategist at Morgan Stanley for the US stock market. The expert made this conclusion after comparing the forward profitability on profit * of the S&P 500 with the so-called break-even inflation rate **.

* expressed as a percentage, the ratio of the company’s future earnings per share to the current market value of one share. Similar to the P / E ratio, but expressed as a percentage

** yield spread between conventional treasuries and inflation-protected (TIPS)

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It turned out that in April this ratio dropped to 2.06%, which is a record low since May 2000.

“The likelihood of further fall of this indicator is low,” Wilson writes.

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