Are we valuing stocks correctly?

Historically low bond rates have altered the equity landscape, but should we be willing to consider stocks on higher earnings multiples?

Summary: The RBA’s recent cash rate cut has once again highlighted the impact of historically low bond rates on how we value companies. Sustainably lower rates will theoretically justify increases to valuations, and those companies generating sustainable earnings will most likely see inflated price-earnings multiples for the foreseeable future. However, if lower interest rates are a function of challenging times, then on a company specific basis, a poor earnings outlook will drag on valuations. 


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