JPMorgan sees disconnect between equity prices and real rates

JPMorgan’s Global Head of Macro Quantitative and Derivatives Strategy Marko Kolanovic says the price of equities is “disconnected” from interest rates. Equities are up year-to-date on multiple expansion while real rates and cost of capital” are moving deeper into restrictive territory,” the strategist tells investors in a research note. The firm says history suggests this relationship “is becoming increasingly unsustainable,” with the S&P 500 Index multiple overvalued by 3-4 times versus real rates. This poses risk to valuations, especially since earnings expectations already face a high hurdle for 2024, contends JPMorgan.