I always like to compare the current market multiple, and it’s inverse the earnings yield ratio, to the risk free rate the government is willing to pay me.
Right now the trailing PE for the S&P 500 is 29.6, and the forward is 20.3.
So on a forward basis, the earnings yield is around 4.9%, with fairly high expected earnings growth.
Okay pretty good.
Right now a 30 year TIPS yield is at 2.93%, and it briefly crossed 3%.
The last CPI was 3.6%. Consensus expects CPI to come in around 3.5% for the totality of 2026. So those principal adjustments should put the nominal return well over 6%.
You might take more volatility on the fluctuations of a long duration 30 year bond.
But 6% risk free is not bad at all.
So are TIPS a value right now?