Two things to nitpick on a macro perspective, both things I would have not expected the article to go into anyway.
First, corporate earnings are at all time highs. Looking at P/E ratios as a measure of if we are in a "normal" sentiment environment is kind of a bad idea, since the P/E ratio captures two cycles at once: the sentiment cycle (higher P for less E), and the earnings cycle (higher E overall). At P/E of 15 when the earnings cycle is at it's peak (as it is now) may still be reflecting extremely high (read: irrational) relative sentiment towards equities, even though the ratio itself sits only slightly above average. And, in fact, there are many indicators that point to the fact that the public is more bullish on stocks now than they have been since before the 2008 crisis, even though the P/E ratio is only 15-16.
Second, the consensus right now is forming that we may have finally turned the corner in the 30-year bond bull market, and interest rates are on the rise again. If this is true, it represents an important change for asset managers, and will trickle all the way down to private equity and startup funding. As rates rise, particularly if they rise not just due to inflation but due to tightening monetary policy, investors will need to deploy less capital to reach for yield to places such as private equity, so you can expect deal terms to get more "investor friendly." (I am not sure if we are actually at the beginning of a bond bear market, but many people believe so.)
so sentiment shouldn't really have peaked unless earnings already did too?
wonder if anyone else has seen this, and when he wrote that, if it was during the Fed scare correction that seems to have been succeeded by the Fed relief rally.
Arguably the downwards pressure on bond yields due to fed policy has inflated asset values enough to dislodge sentiment from valuations. Many people are rotating money into stocks since they can't think of any better place to get a return, and the bull market is enticing them to overweight.
First, corporate earnings are at all time highs. Looking at P/E ratios as a measure of if we are in a "normal" sentiment environment is kind of a bad idea, since the P/E ratio captures two cycles at once: the sentiment cycle (higher P for less E), and the earnings cycle (higher E overall). At P/E of 15 when the earnings cycle is at it's peak (as it is now) may still be reflecting extremely high (read: irrational) relative sentiment towards equities, even though the ratio itself sits only slightly above average. And, in fact, there are many indicators that point to the fact that the public is more bullish on stocks now than they have been since before the 2008 crisis, even though the P/E ratio is only 15-16.
Second, the consensus right now is forming that we may have finally turned the corner in the 30-year bond bull market, and interest rates are on the rise again. If this is true, it represents an important change for asset managers, and will trickle all the way down to private equity and startup funding. As rates rise, particularly if they rise not just due to inflation but due to tightening monetary policy, investors will need to deploy less capital to reach for yield to places such as private equity, so you can expect deal terms to get more "investor friendly." (I am not sure if we are actually at the beginning of a bond bear market, but many people believe so.)