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Consumers versus dividends

The dividend yield points to mediocre returns on equities, but consumer spending is sending a more bullish message.
Consumers versus dividends
  • The dividend yield predicts lacklustre returns on equities, but retail sales send a more bullish signal.
  • An upward-sloping yield curve is also a slightly bullish signal. 

Which message do you believe – that from equity valuations or that from consumers? This matters for where you think the market is heading?

Valuations are sending a worrying message. At just over 3.1 per cent, the yield on the All-Share index is a little below its 25-year average (of 3.3 per cent). If history is any guide, this points to poor returns on equities over the next three years – albeit probably inflation-beating ones.

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