Stocks Vs. Bonds: Negative ERP Indicates It May Be Time to Rethink Your Allocation

  • 📰 Investingcom
  • ⏱ Reading Time:
  • 46 sec. here
  • 2 min. at publisher
  • 📊 Quality Score:
  • News: 22%
  • Publisher: 53%

Belgique Nouvelles Nouvelles

Belgique Dernières Nouvelles,Belgique Actualités

Stocks Analysis by James Picerno covering: S&P 500, United States 10-Year. Read James Picerno's latest article on Investing.com

The roaring US stock market has delivered red-hot gains in recent history, but at the expense of future returns. That, at least, is one interpretation via earnings-yield and dividend-yield models that estimate the ex-ante equity risk premium . Based on a specific run of number crunching, this pair continues to estimate a negative ERP.

For this exercise, I’m running the numbers two ways: the earnings-yield model and the dividend-yield model . Theis the “risk-free” rate. There are other choices, of course, and so results will vary, depending on your preferences. But this is an obvious way to start, if only as a baseline.earnings yield less the 10-year US Treasury yield.

The result isn’t surprising when you consider that the 10-year yield continues to trade well above the S&P’s dividend yield, as shown by the second chart below. The key takeaway is that bonds continue to present a competitive alternative to stocks, which in turn has asset allocation implications. As always, the critical question is: When does the longer-run valuation outlook overtake the shorter-run trend factor? That, of course, isquestion that every investor struggles with. Unfortunately, there are no easy, much less flawless, answers.

 

Merci pour votre commentaire. Votre commentaire sera publié après examen.
Nous avons résumé cette actualité afin que vous puissiez la lire rapidement. Si l'actualité vous intéresse, vous pouvez lire le texte intégral ici. Lire la suite:

 /  🏆 450. in BE

Belgique Dernières Nouvelles, Belgique Actualités

Similar News:Vous pouvez également lire des articles d'actualité similaires à celui-ci que nous avons collectés auprès d'autres sources d'information.

'Rich Dad Poor Dad' Author Says Time to Buy Bitcoin, Not Stocks and BondsProminent financial expert has made crucial warning regarding Bitcoin, bonds and stocks
La source: Utoday_en - 🏆 295. / 63 Lire la suite »

Stocks vs Bonds: Top 5 Differences & Investing TipsDifferentiating between the stock market and bond market can help investors appropriately allocate their funds. Explore the differences and how to invest.
La source: DailyFX - 🏆 305. / 63 Lire la suite »