Over the last 100 years inflation has averaged 3%. Over the last 50 years inflation has averaged 4%.
Investors today are very dangerously projecting extremely low inflation far out into the future.
The result is that investors are using Treasury bonds at 3% as a hurdle rate which is half of where they historically have been, and these low hurdle rates are driving equity valuations higher. Those higher valuations are likely to be temporary.
