SPX Earnings yield

Investment Analysis Clubs Macro Economic Trends and Risks
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Earnings Yield = trailing 12 month earnings divided by index price (or inverse PE)

Note that earnings yield isn’t the same as dividend yield since earnings can be retained or reinvested in capital equipment, stock buybacks, etc.

Current S&P 500 Earnings Yield: was 3.98% at 4:00 PM EDT, Mon Apr 7. This compares with the historic median of 6.64%. The SPX is still dramatically overvalued. The 10-year Treasury yields 4.26% so risky stocks yield less than risk-free Treasuries.

The chart shows that peaks in the earnings yield coincide with the beginning of great bull markets (when the P/E ratio is very low).

Some of my bonds are maturing soon but I don’t see anything I want to buy. Stocks, bonds, even gold – none are tempting. All are too expensive at these levels – especially with a recession probable in the near future.

Wendy

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Dear Wendy,

First thank you for posting. I like looking at this data.

My question is, are treasuries at this point risk-free?

The treasuries won’t be perceived that way for long.

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Why do you think bonds are too expensive at this level if you are expecting a recession?

If we have a recession, those bonds will appreciate and if you wait, you will get 1/4 the yield you could get today.

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By Memorial Day this will be repeated in the US.

https://www.reuters.com/world/us/us-house-republicans-face-divide-they-look-move-ahead-trump-tax-cuts-2025-04-07/

NOTE the US paper is the underpinning of the rest of the financial system.

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I notice that BLE is selling below the usual $10 and paying 6.18% fed tax free.

Investors must be finding leverage investing in bonds risky.

The all time high for BLE shares is $17.80/share.

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Folks total garbage. He has no idea what is happening.

The bond market is about to collapse. Long term yields in the marketplace will be higher.

Many CEOs have been stating we are in a recession already.

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Then it’ll have to be T-bills and/or TIPS. You can still get a 10-year TIPS at about CPI+2%.

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It is paying 6.18% PER YEAR … and had you bought it yesterday, it went down by 4.79% IN ONE DAY! That’s down over 9 months worth of yield in one day. Not only that, but if other investors in BLE “panic” and sell, the fund is forced to sell bonds that it owns at a loss. You can’t “hold till maturity” in a bond fund.

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