Amid all the tumult in the stock markets last week, on Wednesday we crossed a line that almost never gets crossed: The dividend yield on the stocks in the S&P 500 was, for a brief moment, greater than the yield on ten-year Treasury bonds. As the demand for Treasury bonds increased, the yield dropped to 2.11 percent at its lowest point, while the average yield on the S&P 500 stocks was at 2.32 percent.
The last time we experienced this situation was in November 2008, just as it seemed our entire economy was falling apart. That was only the second time those two yields had crossed since 1958.
But the current scenario isn't necessarily reminiscent of 2008. For one thing, back then, when Treasury yields fell below those of the S&P, they stayed there for a couple of months. Wednesday's occurrence was the result of ten-year Treasury yields dropping 89 basis points in 12 days, and they've since bounced back a little. And we certainly hope we not headed for another tumble, like we saw through the winter of 2008-2009.
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