Charts of the Week
Stock Market Yield versus Bond Yield
Chart of the Week for June 14, 2013 - June 21, 2013
Investors typically think of bonds when searching for income. However over the last year, the stock market has provided a dividend yield greater than the bond market yield. The bond market, as represented by the 10 Year U.S. Treasury Bond, regained its income advantage over stocks in May when the bond market yield rose from 1.63% in early May to 2.20% in mid-June. One of the factors that has significantly influenced bond yields is Federal Reserve monetary policy. Recent hints from the Federal Reserve that they may reduce their monetary stimulus programs contributed to the 10 Year U.S. Treasury Bond yield increase.
Whether bonds are more or less attractive than stocks must be determined by each investor and should not be determined based on yield alone. In addition even when stocks yield more than bonds, stocks typically have greater volatility or potential volatility in their value. The stock market dividend yield is represented by the S&P 500 Index ("S&P 500"), which tracks the performance of 500 stocks of larger capitalization companies traded in the U.S. and the dividend yield is the trailing annual dividend per share divided by the current share price.
© Copyright 2013 ICMA Retirement Corporation, All Rights Reserved. This information is intended for educational purposes only and is not to be construed as investment advice or a solicitation to buy or sell securities. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed here. Past performance is not necessarily indicative of future performance.