Equity valuations revert to their pre-financial-crisis relationship with investment-grade bonds: either the S&P 500 forward P/E reaches 20x (about 3,600 on the index) or investment-grade yields rise to 6.45% (from 4.84%).

What counted as right

Status

resolved

Settled on

2020-11-16

Resolves TRUE if, at any point on or before 2021-05-25, EITHER (a) the S&P 500 forward P/E reaches 20x — equivalently the index reaches about 3,600 — OR (b) US investment-grade corporate bond yields rise to 6.45% from the 4.84% cited. The claim is disjunctive, so either leg alone suffices; the index leg resolves on a touch of ~3,600 at any point in the window, with no timing-miss penalty since Avow imposed the horizon.

The criterion is explicitly DISJUNCTIVE ('either leg alone suffices') and explicitly resolves the index leg 'on a touch of ~3,600 at any point in the window, with no timing-miss penalty since Avow imposed the horizon'. Leg (a) is satisfied on both of the equivalent formulations the criterion offers: the forward P/E exceeded 20x by around August 2020 (peak 23.6x), and the index closed above 3,600 on 2020-11-16. resolved_on is set conservatively to 2020-11-16, the first precisely-dated, unambiguous index print above the ~3,600 level on a closing basis; the disjunction was arguably satisfied a few months earlier via the P/E formulation, so 2020-11-16 is the latest defensible first-satisfaction date, not the earliest. IMPORTANT CONTEXT FOR THE LATER SCORING STAGE (flagged, not adjudicated here): leg (b) did not merely fail to trigger, it moved sharply the other way — investment-grade yields collapsed to record lows near 1.79% instead of rising to 6.45%. So the economic MECHANISM Lee described (equity/bond valuation convergence closing from both sides) played out on the equity side only, and the multiple expansion was substantially driven by the post-COVID collapse in discount rates rather than the reversion he described. The written criterion nonetheless requires only one leg, and the index leg is met on the plain text. Recording both sides here per instructions; no outcome value assigned. No conflicting credible evidence about the underlying facts — the index and yield levels are not in dispute.

Sources

• we see equity P/E going back to pre-Financial crisis relationship to investment grade bonds

  X (Twitter) — @fundstrat (Tom Lee) · 2018-05-25

  Source

• Archived capture of twitter.com/fundstrat timeline

  Wayback Machine · 2018-05-26

  Source