S&P 500 Yield > 10-Year Treasury Note Yield

Yields signaling the bottom for stocks?  I think so.

Wow!  This is amazing!

S&P 500 dividend yield = 3.57%
10-Year US Treasury Note yield = 3.54%

If that isn't signaling the near of a bottom then I am not sure what does.  One must ask themselves, "where is the real risk?"

I can either:

[A] Buy overpriced 10-year Treasuries that are barely a bit higher than average inflation numbers

or

[B] Purchase equities at dislocated prices that are now giving way to the S&P 500 trading at 17 times next years earnings and yielding a dividend greater than the 10-year.

The argument to this conclusion would be that dividends will be slashed by most firms in the index thus lowering the dividend yield.  And this is true.  However, the flip side to this argument is that the 10-year treasury, along with most other govies, are overbought.  And I think they are.  In fact, at one point last week T-bills had a negative implict yield - in other words, bond investors were paying the government to hold their funds.

With all of that said, I pick option "B" as listed above.  With the S&P stocks trading at such low multiples, the selling will soon stop and the heavy buying will commence.  Hang tight people.

Comments

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