Historical stocks dividend yield versus treasury bond yields

Long term historical dividen yield (1900-2008) (source: contraryinvestor.com)

These two charts give us a lot of information about the history of money in the United States. As I have already commented on other occasions, the U.S. is the only world financial system with enough historical data, in order to make a long-term analysis and historicals studies. It’s very useful, for to take better investments decisions today.

Two conclusions:

1. The great stock bull market really ended in 2000 when dividend yield reached a historic low below 2%. A low dividend yield= stock prices expensive related to corporate earnings.

2. The stock market is still far from being “cheap” in historical terms. This does not mean that the stock market can not go up a few months or even several years but it is clear that it is very unlikely to rise during the next few years.

Long term US treasury bond yield chart (1953-2008) (source: FT), (click to expand).

You can also compare this indicator with the U.S. Treasury Bond yied. Clearly,  and investment managers always compare the two assets in order to decide which is more attractive in terms of risk and return.

Notice also the curious resemblance to the indicator of liquidity in the percentage of mutual funds (published in September in my Blog). It reflects a high degree of complacency or euphoria which often coincides with historical market tops.