The Financial Post reports in its Wednesday, Jan. 8, edition that U.S. bond markets indicate that equity bulls may be overly optimistic. A Bloomberg dispatch to the Post reports that stocks are nearing their highest overvaluation against corporate credit and Treasuries in two decades, with the S&P 500's earnings yield at its lowest compared with Treasury yields since 2002. This suggests equities are the priciest relative to fixed income in decades. For company debt, the S&P 500's earnings yield, at 3.7 per cent, is close to the lowest relative to the 5.6-per-cent yield of BBB rated dollar corporate bonds since 2008. The equity profit yield is usually above the BBB figure, because stocks are riskier. Since the turn of the century, when the gap between the two figures has been negative, as it is now, it tends to spell trouble for the stock market. Over that period, such a negative read has only ever occurred when the economy was experiencing a bubble or soaring credit risk. High equity valuations can make it harder for prices to keep rising at a similar pace. Goldman Sachs sounded a caution signal on that front in October, predicting the S&P 500's annual return would average 3 per cent over the next decade.