Credit Markets Signal Warning for a Relentless Equity Rally
- Stock earnings yield is high relative to debt yields
- That signal has preceded equity selloffs in the past
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US bond markets are signaling that equity bulls may be a little too exuberant now.
Stocks are close to the most overvalued against corporate credit and Treasuries in about two decades. The earnings yield on S&P 500 shares, the inverse of the price-earnings ratio, is at its lowest level compared with Treasury yields since 2002, signaling that equities are at their most expensive relative to fixed income in decades.