Valuation

An earnings-yield proxy minus the 10-year Treasury yield — what equities pay over bonds.

How Earnings-yield proxy = the trailing 3-year geometric annualized S&P return (a free CAPE-like stand-in with no EPS series).Formula 3y-annualized SPX return − 10ySource Yahoo Finance, FRED

How to read Higher = equities compensate more over bonds; compression = stretched relative valuation.

Descriptive: the earnings yield is a trailing-return PROXY, not a true forward earnings yield.

The ERP expressed as a spread — the earnings-yield proxy minus the 10-year, with its history.

Formula earnings-yield proxy − 10ySource Yahoo Finance, FRED

How to read Positive = equities compensate for bond risk; negative = bonds win on yield alone.

The forward-looking implied equity risk premium — the long-run valuation context.

How Backed out of the index level via a two-stage augmented dividend-discount (FCFE) model.Formula Damodaran implied ERP (FCFE), annualSource A. Damodaran (NYU Stern)

How to read A step line because the series is annual — read it as the long-run valuation backdrop, not a tactical signal. It is the forward return premium investors implicitly demand to hold equities over bonds: a high level versus its own multi-decade history means stocks are priced to compensate well for risk (cheap), a low level means thin compensation (rich). Compare today's step to the historical range, not the year-to-year wiggles.

ANNUAL cadence (coarse); reproducible-given-inputs and embeds a growth estimate.