For the better part of the past 10 months, investors have justified the huge melt-up in equity prices in the face of economic and societal hardship from the Covid-19 pandemic with three simple words: “But bond yields.”
I know this in part because I made that exact argument in early September in a column that ended up coinciding with an all-time high for the S&P 500 Index that would last for more than two months. It showed that the dividend yield on the S&P 500 and even the Nasdaq 100 were reliably above the benchmark 10-year Treasury yield, indicating that equities still had plenty of relative value when compared with the world’s largest bond market.
