Interest rates should have a pretty obvious and direct connection to equity valuation (lower rates -> higher stocks), but is doesn't show up cleanly in the data. Why not? Interest rate declines could come from: • lower cash flow expectations (bad for stocks) • discounting (good for stocks) • lower risk premium (good for stocks) Cleaning this up shows that discounting flows pretty cleanly to stock valuations; and duration-sorted portfolios respond more naturally to discount shifts. This discounting effect has pushed up US equities. Why is that? They argue it's in tandem with capital inflows to the US. by Niels Gormsen and Eben Lazarus