Bond Market’s Yields Have a Chilling Message for Stocks

The result is the so-called equity risk premium—the extra return investors expect for holding risky stocks over safe bonds—is getting compressed. When comparing the latest 4.95% earnings yield of the S&P 500 with the 5.0685% yield on the 30-year Treasury, the value of -0.1185 percentage points on Friday is higher than only 6.4% of the trading days since July 2007. When compared with the 10-year Treasury’s yield, stocks offered a positive but meager equity risk premium of 0.2654 percentage points last week.