It would admittedly be satisfying if we could just get the economic slowdown that seems to be required to respect supply side constraints. Ideally, investors would recognize that slowdown as required and therefore to be extrapolated, rather than looking for a “remedy” from the Fed.  That might set up the condition to restore a long in equities. It has been a year. And it is not as though there have been no wiggles.

But we don’t always get what we want.  In this note, I explain why the bears can’t really rely on the notion that valuation is stretched.  Equities look to be about appropriately valued to the (secular) low-vol environment. I also explain the logic behind my metrics, which rhyme with but are actually importantly distinct from Shiller’s. As I alluded to in an aside in my last formal report, for example, my metrics do not rely implicitly on margin mean reversion.  There are other key differences as well, which I list here.

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