Food for thought
How do proponents of the Fed model explain undervalued European equities? Europe has had negative interest rates for almost a decade. According to the low rate/high valuation theory, European stocks should be selling well above their average historical P/E multiples. But the fact is they have been undervalued relative to the U.S. market for almost a decade.
Because there is no guarantee that interest rates will continue to remain historically low, should the Federal Reserve raise rates in the near future the Fed model theory will be put to the test.
