The forward S&P 500 earnings yield is typically higher than the 10year U.S. treasury yield in most periods, reflecting a positive equity risk premium. As of this morning, this is no longer the case, with the 10-year U.S. treasury yield of 4.54% now higher than the forward S&P earnings yield of 4.50% (inverse of S&P500 2026 P/E of 22.2x) for the first time since early 2024, and prior to that the 2000 dot com bubble. This is likely triggering today’s equity weakness as 10-year treasury yields surge.
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