In August 2020, the 10-year US Treasury paid 0.52% a year. On 14 October 2026 it paid 5.19%. Ten times as much. Over the same period the S&P 500 climbed to 7,744, close to an all-time high.
Put together, those two numbers raise a question that has not mattered for a decade: are bonds once again competing with stocks for a long-term investor's money? I manage portfolios on three axes, equities, bonds and currency, and this is exactly the question you ask on the first two together.
What each side offers today
With a 10-year government bond, the return is known in advance: buy today, hold to maturity, and you earn about 5.2% a year, nominal, in dollars. No forecast involved.
Equities have no number known in advance, but there is a standard way to estimate the expected return over a decade. It has three parts:
| Component | Annual estimate | Where it comes from |
|---|---|---|
| Dividend yield | +1.0% | Near a historic low, because prices are high |
| Nominal earnings growth | +5.0% | About 2.5% real growth plus inflation |
| Valuation reverting to the mean | −2.2% | A forward P/E of about 21 returning to its 25-year average of 16.8 over ten years |
| Total | about 3.8% | Compound annual return, nominal |
In nominal terms, then, bonds offer about 5.2% with certainty and equities about 3.8% by estimate. A gap of roughly 1.4 percentage points in favour of bonds. The last time the gap pointed this way and was this large, institutional investors started changing their mix.
The 3.8% figure is an estimate, not a measurement. It is very sensitive to the valuation assumption: if the multiple does not revert, the expected return from equities is closer to 6%.
The assumption that flips the conclusion
There is a second, equally standard way to read the same numbers: in real terms, after inflation.
The market currently prices about 2.3% annual inflation for the next decade, so the bond yields about 2.9% real. Estimate equities as dividend plus real growth, without assuming the multiple falls, and you get about 3.5% real. On that basis equities still lead, by about 0.6 points.
So who is right? Both approaches are legitimate. The difference between them is a single question: will today's high valuations revert to the average, or are they the new normal. Anyone who hands you a clear-cut conclusion without saying which assumption they used is showing you half the math. And the one thing you must not do is compare a real return on one side with a nominal return on the other. It is the most common mistake in this debate.
Why a bond track is not a 10-year bond
Say you conclude that some money should move from equities to bonds. There is a trap here that almost nobody explains.
A bond track in an Israeli study fund or provident fund is not a 10-year US Treasury held to maturity. It is a managed portfolio, mostly Israeli bonds, run by duration rather than to maturity. That means:
- The track's return is not 5.2%. It depends on what it actually holds: government or corporate, Israeli or foreign, inflation-linked or nominal.
- A track does not lock in a yield. When rates fall, the bonds already in it gain value; when rates rise, they lose. Nobody entering a track holds the same bond for ten years.
- "Bonds" in the name does not tell you how much is in bonds. Some "credit and bonds" tracks hold up to 25% equities, others almost none.
So the real decision is not "stocks or bonds" but "what is in the track I am considering, and what will it do to my overall portfolio". You can check the composition of every track at every provider on the track lookup page (in Hebrew), based on official Ministry of Finance data.
What this means for you
If your money is in a full equity track and your horizon is ten years or more, these numbers do not require you to do anything. They do require you to check one thing: is your equity exposure a decision, or something that happened because that is how the account was opened.
The question is more urgent in three situations:
- A short horizon. Someone who needs the money in three to five years and sits at 100% equities is exposed to a correction precisely when stocks are expensive and the safe alternative pays more than it has in a decade.
- Concentration. A study fund in equities, a provident fund in equities, a brokerage account in equities. Each looks reasonable alone. Together it is one portfolio with no second axis.
- No written plan. If you do not know how much of your portfolio is in equities, abroad and in dollars, you cannot decide whether to change anything.
The decision is not made on two lines in the newspaper. It is made on the overall mix, the horizon and the goal. That is exactly the work of a wealth strategy.
The bottom line
For the first time in a decade, US government bonds offer a return that genuinely competes with the expected return from equities, in nominal terms. In real terms, equities still lead slightly. Both readings are correct, and the conclusion depends on the assumption. What does not depend on any assumption: you should know what is in your portfolio today before deciding whether to move anything.
Data as of 14–15 October 2026. Sources: 10-year yield and breakeven inflation, FRED (DGS10, T10YIE); S&P 500, FRED (SP500); valuation averages, JPMorgan Guide to the Markets. General information only; not investment advice or a recommendation to act. Past performance does not indicate future returns.
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