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The S&P 500 risk premium -- the forward earnings yield minus the 10-year Treasury yield-- is now nearly zero. "Such dismal equity risk-reward prospects have only been seen once in
the last quarter century and that was coming out of the 2000 bubble top," says Danielle Park, president of Ontario-based Venable Park Investment Counsel. She points out the last time
the risk premium was this low, the S&P 500 fell 45% from March 2000 to Oct. 2022, and didn't recover its cycle high until July 2007. She points out the latest move down in the risk
premium has coincided with an increase in retail participation. Heavy participation from retail investors -- or bagholders -- is typical of market tops, she adds.
