## Figure 1.6. Asset Price Misalignment

## Source details

**Canonical URL:** [Figure 1.6. Asset Price Misalignment](https://www.imf.org/-/media/files/publications/gfsr/2019/april/english/ch1data/charts/figure1-6.pdf)

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### Equity valuations and model framework
- Panels 1–3 show results from an equity valuation model based on:
  - average expected earnings,
  - dispersion in earnings expectations,
  - interest rates.
- Panel 1: "US Equity Market: Prices and Fundamentals-Based Valuations (S&P 500 index price in logs)".
- Panel 2: "US Equity Market: Changes in Prices and Contributions to Valuations (Percent and percent contributions; cumulative)".
- Panel 3: "Global Equity Markets: Price Misalignments (Positive values indicate overvaluation; percent of prices)".
- Statistical ranges and terminology explicitly used on the figure:
  - "25th–75th percentile range"
  - "Deviation from weighted-average fitted value"
  - "Minimum-maximum of the range since Oct. 1998"
  - "Misalignment (right scale)"
  - "Actual"
  - "Model’s prediction"

### Key findings on equity markets and earnings
- "In the United States, the misalignment remained small since late 2018 ..."
- "... as the recovery in equity prices has been accompanied by a reduction in earnings uncertainty."
- "Equity valuations in most major markets seem close to fair values."
- Time labels and periods shown on charts:
  - "2017"
  - "2018:Q1–3"
  - "2018:Q4"
  - "2019:Q1"
  - Historical x-axis values present, e.g., "2001 03 05 07 09 11 13 15 17" and "2006 07 08 09 10 11 12 13 14 15 16 17 18 19"

### Credit and bond market observations
- Panel 4: "Residual Market Risk Premiums for US Dollar-Denominated Corporate Bonds (Difference between corporate spread and default risk component; percent)".
- "Credit risk premiums have widened, on net, since October 2018, but remain low by historical comparison."
- Banding and contributors shown for cumulative changes in valuations include:
  - "Changes in the extent of misalignment"
  - "Contribution of interest rates"
  - "Contribution of dispersion in earnings forecasts"
  - "Contribution of mean earnings forecasts"
- Categories referenced for corporate bond spreads and residual risk:
  - "Developed market high-yield bonds"
  - "US investment-grade corporate bonds"
  - "Emerging market corporate dollar bonds"

### Term premiums and real estate capitalization
- Panel 5: "Estimated 10-Year Term Premium (Percent)".
  - Summary statement: "Term premiums are broadly in line with values implied by fundamentals."
  - Axis tick values visible: "0 2 4 6 8 10 12 14 16"
  - Additional numeric sequence displayed: "6.4 6.6 6.8 7.0 7.2 7.4 7.6 7.8 8.0"
- Panel 6: "Capitalization Rates for Selected Economies (Percent)".
  - "Capitalization rates in most commercial real estate markets reached all-time lows, with some signs of overvaluation."
  - Selected economies listed: "Australia, Canada, Denmark, France, Germany, Ireland, Japan, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States."
  - Example axis and values presented: negative and positive ranges like "–1.5 –1.0 –0.5 0.0 0.5 1.0 1.5 2.0" and larger percent ranges like "–30 –20 –10 10 20 30" and "–20 –15 –10 –5 10 15 20 25 30"

### Visual and labeling notes from the figure
- The figure uses cumulative percent and percent-contribution displays for changes in prices.
- Multiple time series and country labels appear across panels, including:
  - "United States", "United Kingdom", "France", "Canada", "Germany", "Japan", "Italy", "Ireland", "Euro area", "China", "Brazil", "India".
- Vertical and horizontal axis values shown in the figure include:
  - "0 2 4 6 8 10 12"
  - "0 5" (appears in one axis grouping)
  - Negative axis points such as "–15 –10 –5" and "–20 –15 –10 –5"
  - Year sequences with quarters: "2017 18:Q1–Q3 18:Q4 19:Q1"

*Sources: Bloomberg Finance L.P.; IPD MSCI; JPMorgan Chase & Co.; Moody’s; S&P Leveraged Commentary and Data; Thompson Reuters Datastream; Thompson Reuters I/B/E/S; and IMF staff calculations.*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2019/april/english/ch1data/charts/figure1-6.pdf_