A Very Bearish Indicator

By John Del Vecchio and Brad Lamensdorf

The dividend yield on the S&P 500 relative to the 10-Year yield has imploded to levels that often coincide with mediocre stock returns.

That’s bad news for the stock market.

We believe the market is vulnerable for a major move downward until the yield on the S&P starts to become modestly attractive again.

How low could we go?

Below 3,000. That just gets us back to a 2% yield.

Likely below 2,800. Since markets often overshoot in both directions, 2,400-2,500 is not out of the question either. That’s a 2.5% yield.

Dividends have been a key driver of stock performance for decades.

We recommend this short research paper from Hartford Funds discussing the power of dividends.

Link to research here

The following chart from the paper offers a compelling distinction of performance by dividend policy.

Companies that grow and initiative dividends vastly out-perform those with any other policy. Dividend cutters are ground to dust.

With competition for yield from other areas of the market, the S&P 500 will need to correct sharply for the dividend yield to return to intermediate-term averages and become remotely attractive again.

When that happens there will be a wonderful opportunity to scoop up stock in companies with strong dividend policies.

To learn more about how these indicators can help manage risk in your portfolio, book a call with Brad. You may book a call here.


Lamensdorf Market Timing Report is a publication intended to give analytical research to the investment community. Lamensdorf Market Timing Report is not rendering investment advice based on investment portfolios and is not registered as an investment advisor in any jurisdiction. Information included in this report is derived from many sources believed to be reliable but no representation is made that it is accurate or complete, or that errors, if discovered, will be corrected. The authors of this report have not audited the financial statements of the companies discussed and do not represent that they are serving as independent public accountants with respect to them. They have not audited the statements and therefore do not express an opinion on them. The authors have also not conducted a thorough review of the financial statements as defined by standards established by the AICPA.

This report is not intended, and shall not constitute, and nothing herein should be construed as, an offer to sell or a solicitation of an offer to buy any securities referred to in this report, or a “buy” or “sell” recommendation. Rather, this research is intended to identify issues portfolio managers should be aware of for them to assess their own opinion of positive or negative potential. The LMTR newsletter is NOT affiliated with any ETF’s.  Active Alts  is affiliated with Lamensdorf Market Timing Report. While LMTR uses charts from SentimenTrader, they do not have a financial arrangement with SentimenTrader  Past performance is not indicative of future results.

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