With bond yields surging to 4.7%, T-notes are looking like a better deal than the pricey S&P, says the Research Affiliates’ formula
Research Affiliates suggests that rising bond yields are making Treasuries more attractive compared to the high valuations of the S&P 500. The firm's analysis indicates that U.S. Large Caps are expected to yield only 3.2% annually over the next decade, with even lower returns for Large Cap Growth stocks. In contrast, Treasuries and cash investments are projected to outperform these equities significantly.
- ▪Research Affiliates oversees $188 billion in investment strategies and provides methodologies for various funds.
- ▪The 10-year Treasury yield has recently reached 4.7%, making it a more appealing investment compared to the S&P 500.
- ▪U.S. Large Cap Growth stocks are projected to yield only 1.7% annually, trailing inflation by almost one percentage point.
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This reporter’s go-to source for divining the investment categories, from all around the globe, that promise the best future returns is a feature on the Research Affiliates website called Asset Allocation Interactive. Research Affiliates oversees $188 billion in investment strategies, chiefly for mutual funds and ETFs, and provides the methodologies for its RAFI funds offered by Invesco, Charles Schwab, Pimco, and State Street. The firm’s chair and founder, Rob Arnott, is the former editor of the Financial Analysts Journal, and enjoys great respect in academic circles; in fact, his shop is a magnet for top PhDs in finance. Most of all, the formula that Interactive deploys for positing the gains-to-come is basic, convincing, and rooted in bedrock market math.
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