The WOTE Public: Long-Term SPX Valuation

Discussion

With TIPS 30s closing at a new cycle high of 197 bps today (see below), I thought it was a good opportunity to zoom out and think about SPX valuation on a long-term basis (Twitter thread snapshots below).

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The market can, and more often than not does, go quarters and years deviating from an ivory tower calculation of “fair value”; but at particular points in time fair value matters greatly, and I would argue that right here and now is just such a time with the Fed laser focused on not repeating the “stop and go” policy error of the Burns Fed. In fact, depending on how things play out over the course of 2024 and 2025, SPX could rather soon find itself in the position of deviating below “fair value” for an uncomfortably long period of time.

“If you don’t know where you are going, you might wind up someplace else.”

- Yogi