For years, economists such as MIT’s Ricardo Caballero and Harvard’s Emmanuel Farhi have discussed the shortage of safe assets, the phenomenon which has contributed to bond yields falling since the 1990s. What’s not so well appreciated, however, is that the safe asset shortage also afflicts the UK equity market; there are fewer defensive stocks than there used to be.
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Time the revelator
A simple time trend can predict returns as well as the dividend yield can.
Chris Dillow