Capital Markets: Observations & Insights

Equities Are Inexpensive Relative to Bonds ​ Searching For Yield

• Will TINA * drive the stock market?

‒ The earnings yield for equities is 455 bps more than Treasury bonds

‒ The median yield spread over the past 50 years has been less than 50bps

S&P 500 EPS Yield

Treasury Bond Yield

16

14

12

10

8

6

4

455 bps

2

0

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

Source: FactSet, Federal Reserve, S&P as of 6/30/16. * TINA is an acronym for There is No Alternative [to stocks]

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