Capital Markets Winter 2021

III

A Better “Yield” Lending vs. Owning

• Investors are accepting much lower “yields” for the safety of Treasuries relative to equities but how risky are stock fundamentals over the long term? ‒ Over 10-year periods in the past half century, S&P 500 EPS has always grown (even through this pandemic), averaging nearly 7% annually, while bond coupons do not grow

I

II

Equity “Yield” Is Attractive Relative to Treasuries…

…And Equity EPS Can Grow!

S&P 500 EPS Growth

S&P 500 Earnings Yield

10-Yr Treasury Yield

III

16%

12%

10%

12%

8%

IV

6%

8%

4%

2%

4%

0%

V

0%

-2%

Rolling 10-Yr Annual Growth

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

VI

Source: FactSet, Robert Shiller, Alger. Notes: periods used were annual. Equity yield is LTM EPS / Price. Earnings per share (EPS) is the portion of a company's earnings or profit allocated to each share of common stock.

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