Stock market implications of capitalising intellectual property

The recent change to the accounting treatment of some types of "intellectual property products" in the US national income and product accounts has resulted in a decline in the price/earnings ratio of the US stock market. (We suggested this would happen in a Global Markets Focus that we published in the spring of last year, "Increasing intangible investment – implications for equity prices".) Nonetheless, the valuation of the market still appears stretched relative to its long-run average.