Stocks Reach Cheapest in 60 Years

The U.S. stock market is the cheapest since 1951, according to a model comparing earnings valuations to corporate bond yields.

The S&P 500 has a so-called earnings yield of 9.1 percent, which when compared to corporate bond yields at 6.1% forms the largest gap in six decades, wrote Michael Darda, chief strategist and economist at MKM Partners.

Darda calculated the ‘earnings yield’ by taking the inverse of his current market multiple of 11, which is based on the trailing four-quarters corporate profit data released in the GDP report. This method is similar to the ‘Fed Model’ allegedly used by Alan Greenspan, which took the earnings yield and compared it to government bond yields.

http://www.cnbc.com/id/38042727