For example, if we look at the 30 stocks making up the Dow Jones Industrial Average, it can be seen that half of the members of this elite circle have dividend yields of over 3% and many of them are trading for the lowest P/E ratios since the 1980s. In all, 17of the 30 have P/E ratios less than 15. This is remarkable in that the last time P/E ratios were this low and dividends were even close to being this attractive was in the early 1980s – when interest rates were in their mid teens – not in the low single digits.

Therefore, it can be seen that stocks are pricing in the impact of an economic slowdown to a fair extent. Many of the companies in the Dow Jones Industrial Average dominate their respective industries. In the event that deflation does set in, they should be able to maintain their pricing power and ride out adverse economic events.

At the end of the 1990s, as the last great secular bull market was concluding, many of these companies had dividend yields less than half of current levels and P/E ratios closer to 30 or more. In other words, investors were paying more than $30 for each dollar of earnings. Bull markets do that to otherwise rational people.

As history has shown before, bull markets tend to end with investors paying substantial premiums for stocks and bear markets begin their conclusion with stocks driven to bargain basement levels. Part of the reason that stocks get driven down to these levels is that investors lose their affinity for stocks as an asset class. History shows that investors too often throw in the towel just as stocks begin to offer favorable risk to reward ratios.

That is not to say that the markets are putting in their final bottom. That remains to be seen as the broader macroeconomic landscape takes shape. What it does mean is that choosing to rush into bonds as so many are doing right now is a decision fraught with its own risks.