The Big Macro Force That's Been Driving Stocks Higher for Years
Odd Lots11 Apr

The Big Macro Force That's Been Driving Stocks Higher for Years

Stocks have gone up over the years because corporate earnings continue to grow. That part is straightforward. But in addition to rising stock prices, we've also seen rising stock market valuations. For years, investors have talked about stocks being unreasonably priced, and yet they haven't reverted to historical norms. But perhaps there's a good explanation for this, beyond just animal spirits. Jonathan Heathcote is an economist at the Minneapolis Federal Reserve Bank, who recently co-authored a paper titled, A Macroeconomic Perspective on Stock Market Valuation Ratios. Along with co-authors Andrew Atkeson and Fabrizio Perri, they argue that while stocks may look rich on metrics like price-to-earnings ratios, they look a lot better when based on free cash flow. In other words, because companies haven't had to invest much, their equity is more valuable. Furthermore, labor's share of the profits — the percentage that goes to workers relative to capital — has been on the decline. Of course, these days the big story is about how big, profitable tech companies are spending a fortune on capital expenditure for the AI buildout. So we talked to Jonathan about his research and discuss the possibility that this trend in free cash flow growth could reverse, and therefore hit stock market valuations, too.

Subscribe to the Odd Lots Newsletter
Join the conversation: discord.gg/oddlots

See omnystudio.com/listener for privacy information.

Avsnitt(1194)

The Petrochemicals Shock That's Already Rippling Through Plastics

The Petrochemicals Shock That's Already Rippling Through Plastics

Everyone knows by now that war in Iran is curbing the flow of oil around the world. But oil isn't just a gasoline and jet fuel story, of course. It's also a crucial feedstock for a bunch of petrochemi...

25 Mars 53min

David Shor and Byrne Hobart on the Politics of a White-Collar Wipeout

David Shor and Byrne Hobart on the Politics of a White-Collar Wipeout

Nobody knows when or if AI will lead to mass displacement of white-collar work. But the anxiety is clearly here now, and there's very little evidence that our politicians are taking it seriously. Of c...

24 Mars 55min

What the Iran War Means for Dubai's Luxury Boom

What the Iran War Means for Dubai's Luxury Boom

Dubai has become a huge destination for the rich, with an influx of high-net-worth residents driving up property prices and boosting the UAE's tax revenues in recent years. And of course, Gulf countri...

23 Mars 55min

Here's Why The Iran War Is Prompting A Safe Haven Rethink

Here's Why The Iran War Is Prompting A Safe Haven Rethink

Here's Why is Bloomberg’s short explainer podcast, where we take one big news story and break it down in just a few minutes with help from our experts across the newsroom. We're dropping into your fee...

21 Mars 12min

Greg Brew on Surging Energy and the 'Strategic Trap' of the War in Iran

Greg Brew on Surging Energy and the 'Strategic Trap' of the War in Iran

The war in Iran has already lasted longer than many people might have expected. There was an initial assumption, after oil prices started surging, that President Trump could just declare victory at an...

20 Mars 53min

How War in Iran Will Squeeze America's Farmers Even Further

How War in Iran Will Squeeze America's Farmers Even Further

America’s farmers can’t seem to catch a break. Years of thin margins and rising costs have already stretched them to the limit. And now, war with Iran is making things even harder. The conflict is dri...

19 Mars 47min

War in Iran Is Redrawing the Map for Natural Gas

War in Iran Is Redrawing the Map for Natural Gas

Mostly, the world has been watching the price of oil skyrocket amid the war in Iran and the de facto closure of the Strait of Hormuz. But there's more than just oil that comes out of the region. Qatar...

18 Mars 44min

War in Iran is Chewing Through American Missile Stockpiles

War in Iran is Chewing Through American Missile Stockpiles

The war in Iran has been fought almost entirely in the skies, with both offensive missiles, as well as anti-missile defense systems. But the math is brutal. The war in Ukraine has already put a dent i...

16 Mars 44min

Populärt inom Business & ekonomi

framgangspodden
varvet
rss-jossan-nina
rss-svart-marknad
svd-tech-brief
badfluence
rss-borsens-finest
uppgang-och-fall
avanzapodden
bathina-en-podcast
fill-or-kill
tabberaset
24fragor
rss-kort-lang-analyspodden-fran-di
rss-dagen-med-di
lastbilspodden
kapitalet-en-podd-om-ekonomi
borsmorgon
rss-inga-dumma-fragor-om-pengar
rss-veckans-trade