Brexit Steamrolls Fed Model for Stock Bulls as Bond Yields Drop
- Falling stocks show perils of timing market with valuations
- Fed warns of other risks associated with valuing equities
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The dangers of relying on valuation as a tool for market timing are on display right now in U.S. equities.
At issue is something known as the Fed Model, a comparison of stock and bond yields that has been pointing bulls to equities for three months. As bond yields fell from their March highs, an investor guided by the theory would have bought shares, betting they’d rally as money flowed into them from fixed-income.