S&P 500 Equity Risk Premium – Consensus Bottoms Up Earnings Yield – 10-Year Treasury Yield As low real yields are driving investors to equities, could stocks continue to rise if the equity risk premium falls to 3%? Image: Morgan Stanley Research
Gap Between S&P 500 Earnings Yield and U.S. Treasury Yield This chart suggests that the S&P 500 looks attractive relative to bonds, as the spread between the S&P 500 earnings yield and the U.S. 10-year Treasury yield is 368bps. Image: Goldman Sachs Global Investment Research
Equity Risk Premium (ERP) – S&P 500 Earnings Yield Minus 10-Year Treasury Yield Chart suggesting that the S&P 500 looks attractive relative to bonds. Image: SunTrust Private Wealth Management
Real Yield on U.S. Corporate Bond IG & HY vs. Equity Earnings Yield Real yields on U.S. corporate bonds (IG & HY) exceed equity earnings yield Image: Gavekal, Macrobond
S&P 500 Earnings Yield Less 10-Year U.S. Treasury Yield Goldman Sachs expects the yield gap will narrow to 395 bp by the end of the year. Image: Goldman Sachs Global Investment Research
12-Month Earnings Yield Less Fed Funds Rate The 12-month earnings yield less Fed funds rate is just back to its historical average. Image: KKR Global Macro
S&P 500 Equity Risk Premium: Earnings Yield Minus 10-Year Treasury Yield Chart suggesting that the S&P 500 equity risk premium looks attractive. Image: SunTrust Private Wealth Management
S&P 500 Earnings Yield vs. 10-Year U.S. Treasury Yield The gap between the S&P 500 earnings yield and the 10-year U.S. Treasury yield is currently relatively high. Image: Goldman Sachs Global Investment Research
Valuation – 10-Year U.S. Treasury Real Yield vs. S&P 500 Forward Price/Earnings Ratio Do valuations still matter? During the dotcom bubble, forward valuation metrics were as rich as they are today. Image: Morgan Stanley Wealth Management
Earnings Price Yield for S&P 500 Minus Maturity of 10-Year Treasuries This chart suggests that equities are more attractive relative to fixed income. But the equity risk does not disappear because the spread (earnings yield minus Treasury yield) is positive. Image: Bhirud Associates