Capital Markets: Observations & Insights
Addressing Interest Rate Risks—It’s Too Soon to Worry Valuation
• Potential Risk : higher bond yields lower equity valuations? • Potential Solution : favor equities over bonds given that increasing interest rates have supported higher P/E multiples at low absolute levels
S&P 500 NTM P/E vs. 10-Yr Treasury Note Yield 1964-2017
Higher Rates Rising P/E
Higher Rates Falling P/E
Source: RBC Capital Markets and FactSet. Data is through September, 2017.
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