Summary High interest rates, a low dividend yield, and a weak nominal GDP growth outlook suggests the SPX is ripe for shorting. USD libor is 2.9% higher than the dividend yield on the SPX, meaning that a short position is the most cash-flow positive it has been since November 2007. On modest GDP growth assumptions, the SPX dividend yield would have to rise to 6.7% for the equity risk premium to return to long-term averages, requiring a 70% price decline. Cracks are appearing in the bond market and look likely to spill over into the stock market, suggesting the bear market is resuming. CreativaImages Shorting stocks over the long-term is a fool’s errand as the cumulative effects of dividend payments and nominal GDP growth tend to result in heavy losses. However, there are times when shorting can be highly profitable, and I believe such a time is upon us, for three main reasons. Firstly, with overnight interest rates at 4.6%, the interest received from shorting the S&P 500 Futures ( SPX ) is above the 1.7% dividend yield that you have to pay out. Secondly, nominal GDP growth is poised to slow sharply as the economy enters recession, which […]
K&X Design and Investment Technology, LLC
Invest The Invisible Impact
K&X Design and Investment Technology, LLC
Invest The Invisible Impact
