The spread between the S&P 500 earnings yield and the 10 year Treasury rate is near a historic high – history implies stocks will rise soon.

The current earnings yield for the S&P 500 is 6.8%.  The recent 10 year Treasury rate is 2.97%.  There have only been 14 quarters since 1970 (20% of the time) when the earnings yield has been 150% or greater than the 10 year Treasury rate.  In 79% of the cases when this condition existed, the S&P 500 gained an average of 8.5% sequentially in the following quarter.  The breadth of the spread can be viewed as a fear monitor.  Clearly fear is keeping investors huddled in cash and Treasuries and avoiding stocks (other than LinkedIn –eh?).  History suggests the spread is excessive and is resolved by rising stock prices.  Jeb Terry, Sr. June 3, 2011

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1 thought on “The spread between the S&P 500 earnings yield and the 10 year Treasury rate is near a historic high – history implies stocks will rise soon.”

  1. Sorry, but the RSS seems to be working for me. No other complaints of this issue. If you care to expand on the error message, I will look into it. Glad you enjoyed the article.

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