Weekly Poll: SPY Is Stuck at 110
- Thread starter shortie
- Start date
At the end of trading Friday, the earnings yield on the Standard & Poor's 500 index was 6.6%, based on the past four quarters' operating earnings, the highest since 1995.
The gap between that yield and the 10-year Treasury yieldââ¬âa measure of the cheapness of stocks relative to Treasury bondsââ¬âis the widest about 30 years, according to Jason DeSena Trennert, chief investment strategist at Strategas Research Partners.
To Mr. Trennert, this suggests that stocks are too cheap, bonds are too expensive after a strong rally this year, or both.
"People are so risk-averse now that a tremendous potential opportunity is being created in stocks," he said.
He warned, however, that it could take time for that opportunity to be realized, given the high levels of uncertainty about the economic outlook. "The reasons we're seeing this are secular in nature," he said. "They reflect very long-term problems that are not easily fixed."
http://online.wsj.com/article/SB20001424052748703314904575399533011557248.html
The gap between that yield and the 10-year Treasury yieldââ¬âa measure of the cheapness of stocks relative to Treasury bondsââ¬âis the widest about 30 years, according to Jason DeSena Trennert, chief investment strategist at Strategas Research Partners.
To Mr. Trennert, this suggests that stocks are too cheap, bonds are too expensive after a strong rally this year, or both.
"People are so risk-averse now that a tremendous potential opportunity is being created in stocks," he said.
He warned, however, that it could take time for that opportunity to be realized, given the high levels of uncertainty about the economic outlook. "The reasons we're seeing this are secular in nature," he said. "They reflect very long-term problems that are not easily fixed."
http://online.wsj.com/article/SB20001424052748703314904575399533011557248.html
If the market trades higher on Monday would this be a trustworthy bull leg? My problem is that I see a limit on the upside to 117.5, and I keep asking myself how would the market deal with it if 117/5 is indeed a cap on the upside. That is 7% for the rest of the year. 
I think it is a good observation. I was in fact looking for a chart that depicts the yields of stocks and bonds over time. Does anyone have a URL/pic/chart?
The difference can also be due to perception that the earnings have been on cost cutting and numbers work while the 10-year is real. In addition bonds could sell off, and the difference in yield shrinks.
NOTE: I renew my call to readers of Shortie's threads to vote immediately. Help our friend shortie so he can help us. Please vote now. Do not delay it. a minimum of 100 voters are needed for this to be meaningful.
You can count on me to vote and this week I'm partying with the Bears. Even though it looks like during the last three days we had a healthy pullback I think the failure at the 200 day on Tuesday is a negative and also historically, the first week in August is ugly.
But don't follow what I say because I'm 0-2 in these polls.:eek:
But don't follow what I say because I'm 0-2 in these polls.:eek:
The above definition of bear markets is flawed-- it should be normalized.
NOTE: I renew my call to readers of Shortie's threads to vote immediately. Help our friend shortie so he can help us. Please vote now. Do not delay it. a minimum of 100 voters are needed for this to be meaningful.
NOTE: I renew my call to readers of Shortie's threads to vote immediately. Help our friend shortie so he can help us. Please vote now. Do not delay it. a minimum of 100 voters are needed for this to be meaningful.