Like in Sergio Leone’s film, the story of the S&P 500 is played out with three characters:
In March 2021, we warned the Speculator of the likely end of the Price-Earnings ratio expansion cycle. In June, we warned the Moderate investor that the game was no longer worth the candle. Today, we address the Rentier: The S&P 500 earnings yield is now offset by inflation.
For 50 years, when the Rentier expressed dissatisfaction, it was a message for his two fellow investors to take shelter.