We used the Economatica system to examine the relationship between the 10-year bond yield and the S&P 500 dividend yield currently and over the past few years.
The data we’ve gathered reveals 7 sectors in the S&P 500 have dividend yield higher than the current 10-year bond yield. The sectors Paper Manufacturing (3.7%) – Funds, Trusts, and Other Financial Vehicles (3.64%) – Beverage and Tobacco Product Mfg (3.3%) – Utilities (3.16%) – Petroleum and Coal Products Mfg. (3.12%) – Electrical Equip, Appliance, and Component Mfg. (3.12%) – and Clothing and Clothing Accessories Stores (2.83%) are posting dividend yields with spreads ranging from 96 bps to 8 bps over the current yield of the 10-year bond (2.74%).
Every other sector examined in the S&P 500 has a median dividend yield below the 10-year bond yield.
The chart below highlights the different points over the last 8 years in which the yield-gap has inverted. It furthermore highlights how the spread gap is currently widening, and should the 10-year bond yield continue to trend higher, this could put downward pressure on equity prices.
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