The issue in equities is not mostly valuation

The main issue confronting equities seems to be that the Fed needs to tighten financial conditions in order to manage aggregate demand growth down to near the economy’s supply-side potential, which appears to be in a range of 1 ½ — 2%.  In principle, equities need not contribute to that tightening, but it seems aggressive to assume that they will not, particularly with valuation arguably full.

However, valuation is not itself a major concern here. On my metrics, equities are fairly valued or indistinguishable from fairly valued, as I reiterate – with an update – in this note.