Inflation drags down S&P 500 earnings yield to record low

• S&P 500’s real earnings yield has plunged to its lowest on record at -2.3%, surpasses prior low of -2.1% in 1974

Inflation has never influenced U.S. stock valuations more than it does now. The S&P 500 Index’s real earnings yield, adjusted for changes in consumer prices, shows as much. October’s yield was negative 2.3%, according to monthly data compiled by Bloomberg. That’s the lowest reading since the S&P 500 was introduced in 1957. The previous low was negative 2.1% in March 1974, when the index was falling and the economy was in a recession. The indicator was highlighted by Liz Ann Sonders, chief investment strategist at Charles Schwab Corp., in a Twitter post Thursday.

S&P 500 yield gap to Treasuries signals `ultimate bottom'

U.S. stocks “may be near their ultimate bottom” and already account for a recession, LPL Financial Corp. wrote in a blog post Thursday. The firm cited the equity risk premium, or the difference between the earnings yield on the S&P 500 and the yield on 10-year Treasury notes. Monday’s premium amounted to 5.65 percentage points, the widest since July 2012. The premium was derived from an earnings yield, the inverse of the S&P 500’s price-earnings ratio, of 6.37% and a 10-year yield of 0.72%