Everything Wrong With a Bullish Case on Stocks Tied to Bonds
- Dividend yields, Fed model suggest stocks attractive
- Dire economic picture priced by bonds bodes ill for equities
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Trying to discern a positive message for equities in one of the more harrowing plunges anyone can remember in Treasury yields? You may be deluding yourself.
Yes, by some measures, with each leg down in yields, equity valuations get more tempting. The S&P 500’s 12-month forward dividend yield is the highest relative to benchmark 10-year Treasury rate on record, data compiled by Bloomberg show. And the so-called Fed model, which compares the S&P 500’s earnings yield to bonds, suggests equities are the biggest bargain since 2013.