Published Friday, March 25, 2022 at: 7:49 PM EDT
In the last few weeks, stock prices corrected by as much as 12.5%. As of today’s close, stock prices are about 5% lower than the January 3rd all-time high. A correction in stock prices may still be under way, as Russia threatens the modern world’s geopolitical framework by invading Ukraine, and the U.S. Federal Reserve just began tightening credit to extinguish the worst inflation flareup in 40 years, while the Covid-19 pandemic threat to public health and the worldwide economy lingers.
Which makes this the perfect time to review the equity risk premium: how much investors have been rewarded for taking the extra risk of investing in stocks instead of rolling over 90-day Treasury Bills, which are said to be “risk-free.”
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