S&P 500 Equity Risk Premium at Negative Level, Lowest Since 2002

The equity risk premium on the S&P 500, which measures the attractiveness of stocks over bonds, has reached its lowest point in 22 years and is now at a negative level, the lowest since 2002. This decline in premium indicates that the earnings yield of the S&P 500 is now less appealing compared to the yield of 10-year Treasury bonds. Additionally, the spread between the S&P 500's forward and trailing price-to-earnings ratios has widened to four points. This situation reflects a broader trend where the differential between expected returns on stocks and bonds is deeply negative, a condition not seen since the early 2000s.