r/stockmarketcrash

The Iran war is still dragging on.

The Strait of Hormuz is still being used as leverage, oil markets are still dealing with the fallout, and the midterms are coming up fast.

Now Trump is floating a $5,000 payment to Americans if Republicans keep control of Congress.

So we’re in this bizarre position where:
-War with Iran is unresolved.
-Hormuz is still a pressure point.
-Cost of living is still a huge issue.
-And the president is dangling $5k right before an election.

Call it a “dividend” if you want, but tying a cash payment to “keep my party in power and you get $5,000” is going to look a lot like vote-buying to plenty of people.

The real question is whether voters see this as putting money back in their pockets, or as an attempt to buy goodwill while the war and economy stay messy.

Would $5,000 actually change how you vote?

As a student of financial markets and history, i an interested in understanding what happens when real bond yields exceed the earning yields on equities. We have arrived at that inflection point for the fourth time in a 100 years.

Since 1900, real (after-inflation) bond yields have rarely paid more than stocks' earnings yield (1 ÷ CAPE). It’s happened on 3 occasion before:

1. 1929;
2. 1936–37; and
3. 1999–2000

In all 3 cases, what followed was a big bear market for equities.

I wonder if this time will be different with the unprecedented AI boom. Is it going to be different than the internet or the railroads? Is this the tulip mania?

10-year TIPS are paying about 2.9% after inflation vs. stocks' earnings yield of 2.4% with a CAPE ratioof 41.

This does not paint a pretty reading for holding equities.

Full disclaimer - i have moved capital towards short-duration low risk instruments and selective positioning in gold. I am not holding any long-term bonds - concerned about the rising yields which have further room to run. From an equity perspective, i feel we are in one of the frothiest markets with CAPE ratio of 41. I dont have a view on when the music stops but beleive that we are yet another step closer to an equity bear market. It may still take another year or more and play out differently. Conservatism has been quite costly for folks calling a top in equity markets. No one really knows.

I thing i know is that whenever CAPE ratio has exceeded 40x, real returns over the following 10 year period have been negative for equity holders.

As a prudent long-term investor (wannabe), I rather sit and watch from the sidelines and take positions when i am comfortable with the risk-reward proposition.

Would welcome insights and perspectives from folks you might have a deeper understanding or alternate data.