Allocation choices are what move stocks. Big money enters markets (stocks + bonds) every year. During the COVID crash, the Fed made people prefer the riskiest stocks by putting a floor under junk bonds. This time, they haven't. So where does the money go?
Stocks of free cash flow per share growers. Right now, Berkshire Hathaway trades at a 7.5% EV/FFCF yield. That's for a company that had positive free cash flow during the COVID-19 shutdown quarter, so it's safe to say it is at least as safe as junk bonds.
Plus it grows its free cash flow over time after you buy it (most of its holdings benefit from inflation). Junk bonds don't grow their yield after you buy and currently only yield 6.5%. Berkshire is not alone, but it's the model for these types of companies.
As an allocator, do you buy the asset that had to be saved by the Fed during COVID, despite its lower yeild vs the one that did great without help and a higher yield? This is an environment of positive real yield for the foreseeable future, so you buy Berkshire-like stocks.
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