Morgan Stanley, UBS, Societe Generale, and others are warning of weak returns for the S&P 500.One way to judge how overvalued or undervalued stocks are is to compare their projected future returns to yields offered by risk-free bonds.
Even if stock valuations are lower in an absolute sense, risk-free Treasurys may make more sense as an investment if their yields are comparable to the S&P 500's expected returns. In other words, the risk-reward ratio for stocks — or theOver the last couple of weeks, strategists and money managers on Wall Street have been warning that investing in the broader market is not a risk worth taking right now.
"Even though stocks began the week roughly 15% below the all-time highs reached in early 2022, the S&P 500 isn't cheap when running cross-asset analysis," said Tom Essaye, the founder of Sevens Report, a research firm which counts some of Wall Street's biggest banks as clients."In fact, the broad-based index is currently as expensive as it has been in 16 years relative to bond markets.", the S&P 500's equity risk premium has been on average between 3-3.