The S&P 500 Earnings Yield Matches GDP Growth, and Possibly also Treasury Yields, in Equilibrium
Can r* and Y* be known with precision?
It has long made sense to me, logically, that the return on capital should equal the economic growth rate, in monetary equilibrium, absent real economic shocks. More specifically, that’s another way of saying that, given optimal monetary policy and no unexpected changes to real GDP growth, the current rate of return on stocks should equal the current N…