Returns on stocks are close to bonds. Why?

Today, the forward price to earnings ratio on the S&P500 implies a 5.3% yield. Meanwhile, 30 year treasuries offer a 4.91% yield.

Basically, you are getting very little extra return for owning stocks. If you take those numbers as basically equal – the only benefit to stocks is capital growth (which ultimately can only come from earnings growth).

Said differently, stocks are expensive. I’m surprised at this given the big tariffs that are in place.

A wild (but likely incorrect?) take is that US bonds have high default risk, so the equity – bond difference is actually much larger than it appears.