S&P 500 equity risk premium hits lowest level since 2009 as Treasury yields exceed stock earnings yields, signaling stretched valuations and potential market volatility ahead.
Macro & Markets ·
The S&P 500's earnings yield has fallen to 1.5 percentage points below the 10-year Treasury yield, marking the lowest spread since 2009 and signaling that Treasuries now offer higher returns than stocks despite equities' greater risk. This yield difference has declined 440 basis points since 2022, the steepest five-year drop since the 1970s, putting the S&P 500 on track for its third consecutive year of negative equity risk premium—the longest such streak since 2002. Historically, negative equity risk premiums have coincided with elevated risk appetite and stretched valuations in equity markets.