The U.S. 30-year Treasury yield has climbed to 5%, while the 10-year Treasury yield moved above 4.40%, now exceeding the S&P 500 earnings yield by roughly 90 basis points.
This has pushed the equity risk premium to its second deepest negative level in the past 23 years, signaling that the bond market is no longer offering meaningful support to U.S. equities relative to risk-free yields.
Despite U.S. stocks remaining near record highs, rising Treasury yields are making safer fixed-income assets increasingly attractive, as investors can now secure elevated returns without taking on equity market risk.
However, historical trends show that periods with the weakest equity risk premiums have often preceded some of the strongest future stock market returns, leaving investors divided between near-term caution and long-term optimism.