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Fed Model |
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Fed Model A theory used by some analysts to determine whether to buy stocks or bonds. The theory postulates that there ought to be relative equality between the yield on the S&P 500 and that of 10-year Treasury notes. If the S&P 500 yield is higher, this indicates that the S&P 500 ? and by extension stocks in general ? are undervalued; it is seen as a buy signal for stocks. If 10-year note returns are higher, this is seen as a buy signal for bonds. Contrary to the name, the Federal Reserve does not endorse the model. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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| Indeed, the Fed model, the source of Alan Greenspan's infamous "irrational exuberance" comments, now shows US stocks on consensus estimates at some 33 percent undervalued relative to bonds. The Fed Model developed by the Dent organization continues to indicate that the equity markets are significantly undervalued. The Fed Model indicates the greatest buying opportunity since the early 1920s for stock market investors from late 2002 into 2004. |
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