- 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.