Dormant Inflation Seen Looming as U.S. Stock Valuation Influence
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Inflation may be the biggest influence on whether U.S. stocks sustain their current valuation, according to Talley Leger, the founder of Macro Vision Research LLC.
As the attached chart depicts, the earnings yield on the Standard & Poor’s 500 Index tends to track 12-month percentage changes in the consumer price index, as compiled monthly by the Labor Department. The yield represents the inverse of the S&P 500’s price-earnings ratio.