Average 12-Month Forward S&P 500 Returns by Equity Risk Premium Tranche According to the chart, the current equity risk premium suggests strong gains in the S&P 500 over the next 12 months. Image: SunTrust Private Wealth Management
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 Next Twelve Month Equity Risk Premium Chart suggesting that the S&P 500 NTM equity risk premium remains well above its long-term average. Image: Morgan Stanley Research
U.S. Dollar and S&P 500 Equity Risk Premium Higher bond yields reduce the S&P 500 equity risk premium, which weakens the U.S. dollar. Image: Morgan Stanley Research
Demographics – Labor Force Growth and Term Premium Chart suggesting that growth in the labor force could explain the term premium. The term premium is the risk premium (or the bonus) that investors receive for the risk of owning longer-term bonds. Image: Fidelity Investments
Liquidity Premium and IG Bonds The spread between low liquid and high liquid IG bonds is widening, despite the rally and the belief of an improvement in US-China trade tensions. Image: Goldman Sachs Global Investment Research
U.S. Market – Earnings, Valuation and Equity Risk Premium This chart shows that the P/E ratio is above average, but the equity risk premium is relatively high. Image: Fidelity Investments
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%. Image: 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. Image: 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. Image: Fidelity Investments