Taps Coogan – June 19th, 2023

As the following chart from the FT via Holger Zschaepitz highlights, the forward earnings yield on equities and the nominal yield on investment grade bonds have converged with the 3-month treasury rate (as well as the Fed Funds rate).

At least on a relative basis, the chart above shows the cognitive dissonance that markets are currently demonstrating: stock and bond prices are showing vanishingly little risk premium over cash or short-term treasuries despite the massive move up in ‘risk-free’ returns and widespread recession expectations.

TINA is dead and yet risk premiums have vanished. Go figure…