JPMorgan Chase: U.S. equity risk premium hits new low of 2.1% since 2002, warning that impact of rising interest rates will be more painful than in the past two decades.
JPMorgan Chase's latest research report indicates that the S&P 500 equity risk premium (ERP) has fallen to approximately 2.1%, which is more than 100 basis points below its historical average and the lowest level since 2002. The firm's global market strategy team has issued a warning that in an era of low risk premiums, the stock market's sensitivity to interest rate changes will significantly increase, and the impact it experiences could exceed investors' general expectations over the past two decades. Analysts suggest that this will lead to a systemic increase in the stock market's sensitivity to bond yields, a greater tendency for long-term investors to rebalance between stocks and bonds, and further strengthen the positive correlation between stocks and bonds.
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