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Suddenly, Stocks Aren't Overvalued

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For the first time since 1996, the U.S. stock market is more attractively priced than interest rates. Yesterday's stock market selloff, combined with the long bond breaking below 5%, has pushed the relative yield on stocks vs. bonds into positive territory.

The problem is, of course, that while bearishness among investors has become palpable, and many outstanding values have been created, it's hard to advocate jumping into the current market maelstrom with both feet.

Relative valuation at plus-0.10 basis point still only represents a neutral valuation level for stocks vs. bonds, and -- as the long-term historical perspective shown in the chart below indicates -- the likelihood of stocks reaching more attractive levels relative to bonds remains high.

In calculating market valuation, I compare the six-month forward estimated earnings yield for the

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S&P 500

to the average yield of the 30-year Treasury bond and the 91-day Treasury bill. Here are the numbers behind the current relative yield of plus-0.10.

Ted Murphy ( operates the

MarketPlayer Web site. Previously he was a partner at Equinox Capital Management. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.