Developed Market Equity Risk Premiums Compressed by Rising Bond Yields
nashnova research
The equity risk premium across the U.S., U.K., Australia and other developed markets is being systematically compressed by rising bond yields — in the U.S. the spread has dropped below zero, meaning stocks no longer offer extra return over government bonds.
What is the "equity risk premium," and why is it shrinking?
The equity risk premium (ERP) — the extra return investors earn for holding stocks instead of government bonds — is being squeezed as bond yields rise.
This means → bond yields are climbing, but stock earnings yields have not kept pace. The gap is narrowing fast.
Schwab chief investment strategist Liz Ann Sonders notes this is "not a U.S.-only phenomenon" — it is happening across the U.S., Canada, Japan, Australia, and the U.K.
How severe is the U.S. compression?
Per S&P Dow Jones Indices data, the U.S. spread fell from roughly 2.7%–2.9% in mid-2022 to just below zero by August 31, 2026.
In plain terms = in 2022, U.S. stocks still paid nearly 3 percentage points more than Treasuries. By August 2026, that bonus had vanished — and turned slightly negative.
This reflects bond-yield increases outrunning corporate earnings growth over the entire period.
How do other developed markets compare?
Japan still has the widest spread, but it narrowed from about 7% in early 2023 to roughly 3.3% by August 2026.
Canada sits at about 2.0%; the U.K. at about 2.5% — still positive, but declining.
Australia is at roughly 0.3%, nearly matching the U.S. and close to zero.
What does this mean for everyday investors?
When the spread approaches zero or turns negative, investors bear stock-market volatility yet receive little or no extra compensation versus risk-free government bonds.
This means → the long-standing assumption that "stocks beat bonds over time" is losing its structural support. If bonds offer a similar return, the case for taking equity risk weakens.
Sonders stresses that the cross-market compression trend is the core signal — not the U.S. reading alone.
市场有风险，内容仅供研究参考，不构成投资建议。