Check your calendar, because this is a good week to pencil in some time to wring your hands, furrow your brow, clutch your pearls or do whatever it is you do to express concern the rally in equities may have gone too far.
It doesn’t seem possible that anything with the acronym BEER could be harmful to investors. But let’s just say they’ve gotten a wee bit tipsy on the current Bond Equity Earnings Yield Ratio. The ratio, known in Wall Street parlance as BEER, compares the current yield on 10-year Treasury bonds to the earnings yield of stocks. The earnings yield is the inverse of the price-earnings ratio. The theory is if stocks are yielding more than bonds -- a BEER ratio of less than one -- then stocks are cheap.
The broadest rally in U.S. stocks since at least 1990 has lifted shares of everything from the smallest companies to the biggest banks, signaling the bull market for America’s largest corporations will last at least until the end of the year, if history is a guide.