whidbey

The Best Buy Signal in 51 Years

This test is not gospel. The history of comparing ten year treasury yield to the S&P 500 earnings rate has been problematic in that it can not be applied by the halt and lame brained. As a rule, interest rates fall for a reason, like fear of loss of capital (investors bid up Treasury bonds as safe havens) which is the case in the time period you cited. The use of the rule depends on S&P concurrently having superior earnings relative to bonds due to a good economic outlook. In that instance investors would disinvest in bonds and buy stocks expecting a better return. In the case you cite they were in bonds to escape being slaughtered and the economic outlook was bleak with no prospects of a recovery any time soon. Be careful with forks and cross when you hear the bird chirp.