In this session, I first look back at equities in 2022, focusing on the S&P 500 and put the year (and its negative returns) in historical perspective. I then move on to looking at how the year's price movement has affected expected returns on stocks, where a combination of rising riskfree rates and equity risk premiums have pushed up expected returns to levels not seen in 25 years. Those expected returns become costs of equity for companies, with new investments needing to pass higher hurdles to be good investments. I end the session with a market consensus valuation of the S&P 500, together with valuations as a function of your views on inflation and the economy this year.
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Blog Post: https://aswathdamodaran.blogspot.com/2023/01/data-update-2-for-2023-rocky-year-for.html
Historical Returns on Stocks, Bonds, Bills & Other Assets from 1928 to 2022: https://pages.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xlsx
Historical Implied Equity Risk Premiums for US from 1960 to 2022: https://pages.stern.nyu.edu/~adamodar/pc/datasets/histimpl.xls
Spreadsheet to estimate implied ERP: https://pages.stern.nyu.edu/~adamodar/pc/implprem/ERPJan23.xlsx
Spreadsheet to value S&P 500: