Stocks edge higher this afternoon ahead of the closing bell, but does cash have more gains to show than the markets? Yahoo Finance Markets Reporter Jared Blikre explains how cash yields have risen above stock trades, closely examining the 13-week T-bill rates.

Video Transcript

- Well, stocks edging higher as investors look to Nvidia's earnings for signs on whether the market can move past the downturn in recent weeks, but how has the yield from stocks stack up against cash? Here with the details is Yahoo Finance's Jared Blikre. Professor Jared, take it away.

JARED BLIKRE: Hi, there. Well, in preparation for tomorrow's morning brief, I'm writing about guess what? Anything not related to Nvidia. So I'm looking at cash or the 13-week T-bill yield. And let's take a look at a 2-year chart of what you can invest in the government. Basically, zero-day maturity, you can see how it's gone, especially that big rise last year when the Fed got really hawkish and started raising rates aggressively. You can see it's now sitting at 5.30%.

Meanwhile, if you look at the earnings yield of the S&P 500, which is actually the inverse of the P/E ratio, it's standing at about 4.8%. So in April of this year, we did have a crossover where cash or money market funds or 3-month government bills are yielding more than the equivalent amount of money in stocks.

And I have this chart prepared here. This actually goes all the way back to 1950, and this shows the difference between what stocks are yielding, the S&P 500 earnings yield, minus that 3-month Treasury bill rate, and here it is going negative of this year. Last time it was negative, you have to go back to 2001 and that was coming from the opposite side here. It was in 1996, I believe, that it first started going negative, and we know that there was a huge increase in especially stock prices-- tech stock prices in the 1990s.

So let me go back. This has important implications for how investors are thinking about their money because we had an entire generation where people were used to low interest rates, not used to the fact that they could get a living interest rate out of their money market funds.

And so the investing implications now are the calculus is a little bit different when we see stocks taking a dip. The thinking before was there is no alternative. You have to keep plowing money back into stocks, especially into some of those lower-yielding, high-growth initiatives, and now the calculus is different.

So all of this is going to change. There will be another inversion back toward normalcy when the Fed eventually cuts rates. Of course, we don't know exactly when that is, but for now, things are a little bit different.

- All right. Thank you Jared. Appreciate it.