The yield on the 10-Year Treasury tipped below 1% today for the first time ever as the Fed cut rates by 50 bps. That is a record low yield for the 10 Year. Meanwhile, the past few days have seen the S&P 500’s dividend yield rise to some of its highest levels in over a year. This leaves the S&P’s dividend yield at 2.1% today. That means holding the various levels of risk and other factors constant, stocks are yielding over 1% more than the 10-Year yield. That sharp divergence in yields is shown in the chart below.
Since the mid-2000s, the spread between the S&P’s dividend yield and the 10-year yield has only moved above one on one other occasion, and that was near the depths of the Financial Crisis in December 2008. Start a two-week free trial to Bespoke Institutional to access our interactive tools and full library of research.