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Sky-high equity valuations here to stay?

• Have we witnessed the formation of a US equity bubble on the verge of bursting? Or can current valuations be justified by a shift in macro fundamentals?
• We model an S&P 500 fair value range and attribute medium-term price changes to their fundamental drivers. We find that the nine-year bull run can be largely explained by rising dividends and falling real yields. Elevated valuations are consistent with compressed discount rates and, without a significant repricing of real yields, they could be here to stay.