Alternatives for Dwindling Equity Risk Premiums

Rising real rates have squeezed the equity risk premium to roughly 1.65%, even as AI-driven earnings optimism keeps pushing stocks to record highs.

• Equity risk premium compresses: Siegel notes 30-year TIPS hit 3.5%, implying a ~1.65% equity risk premium versus a 20x-PE stock market's 5% earnings yield — historically narrow.
• Jobs report drives Fed pivot bets: September payrolls showed a 60,000 downward revision to prior months and a soft print, but better participation and manufacturing gains (+70-75k jobs YTD); markets now see an October Fed hike as off the table.

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