Discounting Future Cash Flows in an Economic Recovery
At any given point in time, the value of the stock market reflects all future cash flows, discounted to the present at the appropriate cost of capital. This is important to understand because equities do not and should not necessarily correspond to current economic conditions.
In the context of a recession, understanding the probabilistic recovery outlook can help investors value equities as they assess solvency and future free cash flows.
This article discusses Bloomberg Economics’ “weekly dashboard of high-frequency, alternative and market-based data to track the economy’s plunge into recession and eventual recovery.”
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- Anthony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management
