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
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
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.” Image: 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…