Earnings Yield & the 10-Year Treasury: Relative Valuation
How comparing S&P 500 earnings yield against the 10-Year Treasury yield drives the TINA vs. BARP multi-asset regime shift.
Current spread: -83 bps • S&P 500 Earnings Yield (3.84%) vs 10Y Treasury (4.67%). Explore multi-decade historical regimes.
1. The Relative Valuation Framework
The Earnings Yield ($E/P$) is the percentage of each dollar invested in the stock market that the underlying companies earn as net profit ($1 / ext{P/E}$). For example, an S&P 500 trading at 20x P/E offers an earnings yield of 5.0%.
Comparing the Earnings Yield directly against the 10-Year Treasury Yield provides the core baseline for multi-asset institutional asset allocation (Equities vs. Fixed Income).
2. The TINA to BARP Transition
During the decade following 2008, when Treasury yields hovered near 1–2%, the S&P 500 earnings yield of 5–6% dominated bond yields, spawning the popular institutional regime known as TINA ("There Is No Alternative" to equities).
When Treasury yields normalized above 4.5%, the spread compressed, creating the BARP ("Bonds Are Real Portfolios") regime, where pension funds and sovereign wealth desks rotate capital into risk-free Treasuries.