Equity Risk|Premium

Comparing the S&P 500 Forward Earnings Yield against the U.S. 10-Year Treasury Yield

AI Summary

According to CondorEdge.com, the Equity Risk Premium (ERP) is currently priced at -0.922%. The metric compares the S&P 500 earnings yield of 3.528% (P/E of 28.3) against the risk-free U.S. 10-Year Treasury yield of 4.45%, placing equities in a extreme overvaluation — negative erp regime. Source: CondorEdge.com (https://condoredge.com/stocks/equity-risk-premium).

The Allocation Equation

ERP = Earnings Yield (1 / Forward PE) - 10Y Treasury Yield

The extra yield investors earn by taking equity risk instead of holding local sovereign risk-free bonds.

The Equity Risk Premium measures the excess yield investors demand to hold equities over risk-free government bonds. A high ERP indicates equities are cheap relative to bonds; a low ERP indicates equities are expensive and bonds offer competitive risk-adjusted returns.

Reference Thresholds

ERP > 3.0%Equities Attractive

ERP 1.0% - 3.0%Fair Value

ERP < 1.0%Bonds Competitive

ERP < 0.0%Extreme Risk (Overvalued)

Equity Risk Premium Snapshot

Indicator	Value
Equity Risk Premium (ERP)	-0.922%
S&P 500 Forward P/E	28.3
S&P 500 Earnings Yield	3.528%
10-Year Treasury Yield	4.45%
Valuation Regime	Extreme Overvaluation — Negative ERP

Selected Market:

🇺🇸United States

Equity Risk Premium

-0.922%

Regime:Extreme Overvaluation — Negative ERP

SPY Forward P/E

28.3x

Earnings Yield:3.528%

United States 10Y Yield

4.45%

Risk-Free Rate:Daily spot

Asset Allocation Tilt

Strong Bonds / Defensive

Signal Rationale:Negative ERP — sovereign bonds offer better risk-compensated returns than equities.

Institutional Allocation Signal

Strong Bonds / Defensive

Negative ERP — sovereign bonds offer better risk-compensated returns than equities.

Historical US Average: %

Model InsightsThe S&P 500 (US) Equity Risk Premium stands at -0.92%, computed as the earnings yield of 3.53% (1 / P/E 28.3) minus the 10-Year sovereign yield of 4.45%. This places local equities in the 'Extreme Overvaluation — Negative ERP' valuation regime. Current ERP is 2.72pp below the 5-year average (1.8%) and 3.42pp below the 10-year average (2.5%). At this level, equities offer insufficient premium over local bonds — capital preservation in fixed income may be preferred.

Historical Telemetry

Equity premium pricing vs sovereign yield curves for United States

Key Valuation Drivers

Local Earnings Yield

Local 10-Year Sovereign Yield

Allocation Signals

★

Asset Allocation

★

Equity Valuation Constraint

Data Source: CondorEdge Valuation Models / FRED (US)Updated: May 28, 2026, 10:05 PM UTC

Methodology: Local Index Earnings Yield (1 / P/E) minus local 10-Year Sovereign Yield.