For buy-and-hold investors, the elevated yield looks compelling, at least relative to recent years, when interest rates were much lower. But the better question is:The answer depends on several assumptions, starting with the time frame. You can torture equity returns to say anything you want by changing the time window, so thoughtful analysis is critical here.
Actually, the chart above is a bit misleading because it compares real-time data without a lag. In other words, you earned 9.3% in the stock market over the past decade, but the 4.98% Treasury yield is prospective. The second chart below adjusts for this by comparing how the 10-year yield at any given point in time stacks up against the 10-year return for the S&P 500 over the subsequent decade.If you bought and held a 10-year Treasury Note a decade ago you would earned roughly 2.
No one knows, of course, since equity performance can and will vary widely. For good or ill, there’s no shortage of equity forecasts. Restrictive monetary conditions, from higher yields and tighter lending conditions, are the Fed’s “Waterloo.” If you don’t remember, the “Battle of Waterloo” was fought on June...
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