Market Snapshot: Stocks are tumbling. Why ‘cash’ yielding more than it has since 2007 could be king.

by | Feb 21, 2023 | Stock Market

Cash is king!? When a $6 plastic crown can fetch almost $600,000 at auction, it’s safe to say the value has been inflated. The harder question for investors nearly a year into the Federal Reserve’s inflation fight is whether buying the dip in stocks is wise, or earning a cool 5% yield on safe-haven Treasury bills, a cash equivalent, makes more sense.

By one popular metric, investing in the stock market now yields roughly the same as short-term debt backed by the full faith of the U.S. government, albeit with both still outpaced by the 6.4% annual cost of living as of January. Specifically, the earnings yield of the companies in the S&P 500 index
converged in the past week with the 6-month Treasury
rate, with both meeting around 5%, for the first time in about 20 years (see chart).

U.S. stock market earnings yield and 6-month Treasury rate converge in early 2023 around 5%


The earnings yield looks at the past 12 months of earnings, divided by share price. It also is a …

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