Bond yields near historic lows bolstered the attractiveness of stocks over the past 15 years, when the U.S. Federal Reserve kept rates near zero to support the economy following the 2008 financial crisis.
The latest spurt higher in yields, which began this summer, has taken its toll on stock investors. Although the S&P 500 is up about 9% for the year, it has slid over 8% since late July, when it peaked for the year. The 10-year Treasury yield has climbed about a full percentage point since then. Meanwhile, the equity risk premium , which typically pits the S&P 500's earnings yield against the 10-year Treasury yield to determine equities' relative attractiveness, recently stood at 30 basis points, compared with a 20-year average of about 300 basis points, according to John Lynch, chief investment officer at Comerica Wealth Management.
As it stands, S&P 500 companies are expected to increase earnings by 12.1% in 2024, according to LSEG IBES.
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