Executive Summary

  • Thereʼs a bone of contention among investors: Are U.S. equity values about right or far too high?
  • Based on the equity risk premium, stocks are either marginally expensive or fairly valued (depending on the data window).
  • Yet standard valuation ratios – such as market capitalization-to-GDP, Tobin’s Q, CAPE and market cap-to-corporate profits – suggest stock prices are severely inflated.
  • Equity values are vulnerable to three types of risk premia: the conventional equity risk premium, the risk of monetary tightening and the prospect of decreasing inequality.

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For an abridged version of this article, read our blog post, “U.S. Equity Values: The Three Dogs That Have Not Barked.”

The Author

Jamil Baz

Head of Client Solutions and Analytics

Josh Davis

Global Head of Client Analytics

Normane Gillmann

Quantitative Research Analyst


Emerging Market Investing: A Multi-Asset, Granular and Dynamic Portfolio Approach

This Research paper is a joint effort between PIMCO and GIC, Singapore’s sovereign wealth fund. GIC authors Grace Qiu Tiantian Ph.D., Ding Li, and Zhihui Yap collaborated with PIMCO’s Josh Davis, German Ramirez, and Helen Guo to produce this report.


U.S. Equity Values: The Three Dogs That Have Not Barked
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