Historically, stocks have offered a big premium over bonds. Suddenly, the difference has almost vanished
Investors are now getting less than 1 point of extra expected return for owning stocks instead of safe Treasuries.
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# Equity Risk Premium Compression The equity risk premium—the expected return advantage stocks have historically offered over U.S. Treasuries—has collapsed to less than 1 percentage point, a historically tight spread that signals investors are pricing in minimal additional compensation for stock market risk. This compression reflects either elevated valuations in equities, attractive Treasury yields, or both, and could have significant implications for portfolio allocation decisions and the relative appeal of stocks versus bonds across the broader market.
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