From 24/7 Wall St. · Jeremy Phillips · · 1m 40s
Treasury Bonds Outpace Stocks by 1.13 Points
Treasury bonds now pay 4.98% vs. stocks' 3.85% yield, a gap last seen in 2009.
In brief
Treasury bonds now pay 4.98% vs. stocks' 3.85% yield, a gap last seen in 2009. Treasury bonds pay 4.98% on $100,000 vs. stocks' 3.85% yield, a 1.13-point gap last seen in 2009. Originally reported by 24/7 Wall St..
Treasury Bond Yield
A 10-year Treasury bond closed at 4.98% yield, while the S&P 500 earns 3.85% on $100,000.
Yield Gap Analysis
The bond pays $4,980 annually on $100,000 versus $3,850 from the S&P 500 index fund.
Historical Context
The 1.13-point gap is the widest since October 2009 and last seen in 2009.
Warren Buffett's Warning
Buffett described interest rates as gravity pulling stock prices down, a concept from 1999.
Historical Patterns
Three periods saw the bond yield exceed stock earnings: 1999-2002, 2002-2009, and 2026.
Gary and Linda's Scenario
Gary and Linda have $1.7 million in an IRA: $1.5 million in S&P 500 and $200,000 in cash.
Current Income Comparison
The bond pays $74,700 annually on $1.5 million versus $57,750 in stock profits.
Investment Strategy
Moving $500,000 to bonds increases annual cash income from $15,900 to $35,500.
Historical Outcomes
In 1999-2002, stocks fell 41% while bonds held steady; in 2009, stocks rose 68%.
Earnings Growth
S&P 500 earnings grew 9.4% annually over ten years, reaching $298.03 per share.
Wall Street Forecast
Wall Street forecasts the S&P 500 to earn 5.45% on $100,000, closing the yield gap.
Long-Term Outlook
The bond covers 15 years of spending for Gary and Linda, regardless of market direction.
Buffett's Advice
Buffett recommends 10% bonds and 90% S&P 500 for retirement portfolios.
In short
Treasury bonds pay 4.98% on $100,000 vs. stocks' 3.85% yield, a 1.13-point gap last seen in 2009.
