U.S. Stocks’ Extra Return Is Too Small for Morgan Stanley
Stock investors stand to receive too little return for the level of risk they take, according to Mike Wilson, chief U.S. equity strategist at Morgan Stanley. Wilson drew the conclusion in a report Monday that compared an earnings-based yield on the S&P 500 Index with an inflation gauge: the 10-year breakeven rate, or the gap in yield between fixed-rate and inflation-indexed Treasury notes. The resulting equity risk premium narrowed this month to 2.06 percentage points, the smallest since May 2000, according to data compiled by Bloomberg. “There’s low probability that it will” fall further, Wilson wrote.