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Portfolio > Economy & Markets > Fixed Income

Equities Appear Cheaper Than Treasuries

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Forgive me for getting ahead of myself. I was going to blog about our fixed income investments, but the day has gotten away from me. I’ll be sure to post first thing Wednesday on that subject.

In the meantime, Matt Dority, QES’ head mathematician, came up with an interesting graph showing the dividend rate of the S&P 500 versus the current yield on 10-yeaHistorical yieldsr Treasuries. The chart to the left provides an update through today, plotted daily from 2000 (can go back farther at the expense of legibility). Although the 2008-2009 period reinforces that there’s no reason this differential needs to be positive, it’s historically unusual for the latter to offer a higher 12-month distribution yield than the former. Even near historic lows, the dividend yield is compelling versus the yield for 10 years. This is just a bit of evidence showing the relative cheapness of equities versus that of fixed income. As we said yesterday, this could be a great place to rebalance.

Source:  Data from Bloomberg; based on field descriptions, the SPX dividend and earning series should be trailing (i.e. no estimated divs, no forward earnings).


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