Bond Rates Staying Higher | Forward PE Multiples | Implied Volatility During Earnings | Nominal GDP vs 10 Year Yield
February 18th , 2025
Show Summary:
Derek Moore revisits the 1994-95 interest rate and market environment against the current backdrop regarding treasury yields and future S&P 500 Index returns. Plus, going through the case for higher for longer, whether that is good or bad for markets, and the adjustment the market would need to go through. Later, quantifying how sensitive the S&P 500 Index is to change in the forward PE ratio by putting into actual numbers and levels. Also, looking at Arista Networks and Alibaba before earnings and what the options market is saying their expected one standard deviation moves might be up or down. Finally, most people look at Real Inflation adjusted GDP, but Nominal GDP growth may be correlated to the 10-year yield and what that means if we go back to pre-GFC nominal growth rates. All this and more.
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Topics Include:- What is Nominal GDP Growth Rate?
- What is Real GDP growth?
- The US Dollar index and whether we are out of the zone of significance yet?
- Inflation in services remains sticky
- Why interest rates staying higher isn’t necessarily a problem for the stock market
- Quantifying sensitivity of the S&P 500 Index to small changes in the forward PE multiple
- 1994-95 vs 2024-25 update around treasury yields, S&P 500 returns
- Alibaba and Arista earnings this week and their option implied moves
- How to calculate expected move around earnings based on implied volatility levels
Mentioned in this Episode
Analysts are pretty good at predicting earnings from Sam Ro
Jay Pestrichelli’s book Buy and Hedge
Derek’s new book on public speaking Effortless Public Speaking
Derek Moore’s book Broken Pie Chart
Contact Derek
Last Week’s Episode:
Tariffs | Market Fragility | Mortgage Rate Spread to Treasuries | Analysts Estimates Are Pretty Accurate
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