Search Results for: premium

S&P 500 Valuation and Equity Risk Premium This chart shows that the equity risk premium (earnings yield less 10-year Treasury yield) has declined to 3.9%. Picture source: Fidelity Investments

S&P 500 Equity Risk Premium and Global DM Composite PMI Nice chart showing that the equity risk premium of the S&P 500 is currently elevated. Picture source: JDI research

Equity Risk Premium The equity risk premium (earnings yield less bond yield) stands at 4.48% (the 90th percentile since 1985). It suggests that equities are cheap relative to bonds. Picture source: Fidelity Investments

Liquidity Premium: Investment Grade vs. High Yield Bonds The chart shows that the premium provided by illiquid IG and HY bonds has been drifting wider. Picture source: Goldman Sachs Global Investment Research

MOVE vs. Treasury Term Premium This chart shows the nice correlation between MOVE (implied volatility of U.S. Treasury markets) and the Treasury term premium. Picture source: Longview Economics, Macrobond

Term Premium on a 10-Year Zero Coupon Bond Term premium on a 10-year zero coupon bond remains in negative territory. Investors do not seem to fear rising rates over the long-term. Term premium is the risk premium (or the bonus) that investors receive for the risk of owning longer-term bonds.

The Equity Risk Premium May Be Bullish The equity risk premium suggests that the S&P 500 is not overvalued, which may be a bullish signal. You may also like our “Stock Market Equity Risk Premium.” Picture source: Fidelity Management and Research

Why a Low or Negative Equity Risk Premium Coincides with a Temporary Market Peak? Because it pushes investors into bonds rather than equities. This was the case in 1973, 1981, 2000, 2007 and 2018 before the market crash. The current equity risk premium is available to our subscribers. Our equity risk premium model has a great 99% correlation with…