The risk premium no longer exists on Wall Street
The formula used to determine the expected return on Wall Street stocks yields a result of 5.3%. It is the same rate as cash and low-risk corporate bonds. The stock market now pays like the bond market.
The new financial moment we are in, marked by high-interest rates and the struggle against inflation, is beginning to show a bill of contradictions. As is now the case with the yields of 3-month government bonds (symbol of liquidity), low-risk corporate bonds (investment grade category), and the yield supplied by S&P 500 index shares (prospective earnings yield at 12 months). In all three scenarios, these various asset classes offer the same return to investors.
