NEW YORK (MarketWatch) — Long-term investors are getting a rare signal suggesting that now might be a great time to buy stocks — that is, if they are willing to risk a potential rough patch in the near term.
For just the fourth time in over 50 years, the S&P 500’s dividend yield moved last week above the yield on the benchmark 10-year Treasury note. If history is any guide, this means 2015 could be a very good year for the stock market.
Referencing data provided by Bespoke Investment Group, Jeffrey Saut, chief investment strategist at Raymond James, said these yield crossovers are very rare over the long term. It took the Great Recession in 2008, followed closely by a downgrade of the U.S.’s
credit rating in 2011, to snap a 46-year streak where 10-year Treasury yields were above the S&P 500 dividend yield.
Bespoke Investment Group
Saut said this leads him to believe the stock market is working its way into a good buy spot. Unfortunately, the ‘buy spot’ probably doesn’t arrive until February or March.
Treasury yields, which fall as Treasury prices rise, have been dropping as the sharp selloff in crude oil prices, concerns over growth in Europe and China and a stronger U.S. dollar have fueled fears of global deflation. Saut said expectations that the European Central Bank will announce plans to start buying government bonds in an effort to kickstart a flagging economy are also spurring a “flight-to-quality” move into U.S. Treasurys.