Market Valuation Series Part 6: Interest Rate Model

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https://www.currentmarketvaluation.com/

Videos Referenced:
Stock Market Valuation Video Series Part 1 Miltpl.com: https://youtu.be/y0BxSkpJotA
Stock Market Valuation Video Series Part 2 The Shiller PE Ratio: https://youtu.be/3VNCA89kWDo
Stock Market Valuation Series Video Part 3 The Yield Curve Model: https://youtu.be/5Vo9OfMuAss
Stock Market Valuation Series Video Part 4 Buffett Indicator Model: https://youtu.be/5Vo9OfMuAss
Stock Market Valuation Series Video Part 5 The S&P 500 Mean Reversion Model: https://youtu.be/n8416dQj454
Is the Stock Market Getting Ready to Crash? https://youtu.be/F4VUuOBy4mc
S&P 500 P/E Ratio Valuation Update August 1, 2021: https://youtu.be/9f3JSj0EpUY
Mutual Funds: https://youtu.be/hRip-z93PI0
ETFs: https://youtu.be/N_Dk1yn-mxs
Moving Averages and Oscillators: https://youtu.be/ge0KiCIjpzE

Stock Market Valuation Part 6: The Interest Rate Model
Tools can be used to determine if the stock market is:
Overvalued: Expensive
Undervalued: Cheap
Fairly Valued: Just about right
Interest Rates
Some investors buy bonds in order to receive interest payments (Risk-Off).
However, US interest rates are currently at, or near, all-time lows.
This makes bonds less attractive.
In order to obtain potentially higher returns, investors buy stocks which are considered riskier (Risk-On).
Buying stocks helps keep stock prices at current levels as well as push prices higher.
As of September 10, 2021, Current Market Valuation has measured that compared to interest rates, the S&P 500 (SPX) is Fairly Valued.
Conflict?
Does interest rates rising or falling impact stock prices?
Research done by The SPX Investing Program shows that stocks tend to rise with Interest rates.
Other research indicates that stocks tend to fall as interest rates rise and vice versa.
Both are correct.
The environment dictates this relationship.
There are periods when stocks and bonds move in tandem and other times when they are inversely correlated.
Conclusion
The S&P 500 Value Relative to the Interest Rate Model posted by the Current Market Valuation website is Fairly Valued.
Other Stock Market Valuation measurements show that the S&P 500 is OVERVALUED.
No immediate action is necessarily warranted.
However, it is necessary to have a plan developed and in place in case the market environment changes.
If other measurement tools suggest a major change in trend (up to down) implementing a plan will be in order for:
Those who have only long positions (defensive).
Those who participate in short positions (offensive).