February Chart Attack - Synopsis

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With another quarter of Chart Attack sent to inboxes (you can sign up to the free email list for Chart Attack here), we want to take some time to highlight some charts that jump out at us compared to the prior quarter.

Twelve-Month Forward P/E vs. Average P/E

This chart shows a pronounced increase in the P/E ratio for markets across the board. Not only is the overvaluation stark in most cases, but it happened fairly quickly. One way could be to view this as simply overvalued. Another viewpoint could be that forward earnings estimates are too low and the markets have moved higher in anticipation of those estimates moving higher. 

10-Year Canadian Treasury Yield Vs. TSX Dividend Yield

Just when you thought interest rates could not go lower, the ten-year yield does just that, hitting 1.32%. Contrast this with the TSX yield at roughly 2.74%. The TSX composite yield is at the lower end of the range we typically see historically, but relative to treasury yields hitting lows, this is not an unreasonable shift in our view.

Canada Headline CPI

While there has been a lot of talk about inflation in the last few months, the CPI numbers continue to be below historical averages and do not really seem like they are about to start to trend higher anytime soon. We thought this was an interesting chart simply due to the contrast with higher-level fears around inflation we hear.

House Price to Income and Rent