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The S&P 500 Valuation Tool That Shows 2007 Peak a Long Way Away

  • Earnings yield vs bond yields still flashing bullish signals
  • The gap is part of the dividend case on American equities
Bloomberg business news

Moec: S&P Valuation a Monetary Policy Wealth Effect

A year of profit stagnation has left the S&P 500 Index’s price-earnings ratio flirting with some of its its highest readings since the Internet bubble. Judged against bonds, though, stocks remain stubbornly cheap.

Plotting the index’s per-share earnings against the yield on the 10-year Treasury note, a technique sometimes referred to as the Fed Model, shows the S&P 500 is still less expensive than any time during the 2002 to 2007 bull market. Stock valuations are held down in the comparison by some of the lowest bond payouts ever.