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Uncle Sam Outperforms the S&P 500: Treasury Yields Top Equity Returns

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  Published in Stocks and Investing on Monday, November 17th 2025 at 5:17 GMT by News 8000

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Uncle Sam Is Outperforming the S&P 500 – What It Means for Investors

Over the past two years, a quiet but steady shift has taken place in the U.S. financial markets. While the S&P 500, a benchmark of 500 of the country’s largest publicly‑traded companies, has been rattled by corporate earnings volatility and geopolitical uncertainty, the U.S. Treasury market—often called “Uncle Sam”—has delivered higher risk‑free returns. The article from News 8000, “Uncle Sam Is Outperforming the S&P 500,” dives into the data, the drivers, and the implications for the average investor.

1. The Numbers Speak

According to the article, the S&P 500’s cumulative return from March 2022 to March 2024 was approximately +6.4 %. By contrast, the 10‑year U.S. Treasury yield, a proxy for long‑term risk‑free returns, posted a cumulative gain of +8.3 % over the same period. Even more striking, the 2‑year Treasury’s yield climbed from 1.2 % to 3.8 %, a near tripling of the short‑term risk‑free rate.

When the article breaks the performance down by sector, it shows that defensive stocks—utilities, consumer staples, and health care—outperformed the market’s average, yet they still lagged behind Treasury bonds. Meanwhile, growth sectors such as technology posted the largest outlays, pulling the S&P 500 lower relative to its historical average.

The article links to a Bloomberg infographic (which is embedded in the News 8000 page) that visualises this comparison: a simple line chart where the Treasury curve runs above the S&P 500 line for most of the 24‑month window. The author notes that this is a rare occurrence, as equities typically outpace Treasuries during robust growth periods.

2. Why Are Treasuries Outperforming?

a) Fed Rate Hikes and Inflation Expectations

The most prominent driver cited in the piece is the Federal Reserve’s aggressive policy tightening. The Fed’s “tightening cycle” began in late 2021 and continued through 2023, raising the federal funds rate by 600 basis points in total. This action pushed Treasury yields higher, and the article links to the Federal Reserve’s statement on June 2023 that outlined the plan to keep rates elevated until inflation reached 2 %.

Because Treasury yields are heavily influenced by expectations of future inflation, the article notes that the sharp rise in the 10‑year yield reflects the market’s belief that inflationary pressures will persist longer than previously anticipated.

b) Flight‑to‑Safety Amid Geopolitical Tension

The article also mentions several geopolitical catalysts—rising tensions in Eastern Europe, a cyber‑attack on a major U.S. financial institution, and an unexpected surge in global oil prices. These events increased risk aversion, prompting investors to move cash into Treasury bonds. The author references a CNBC piece that discusses how “flight‑to‑quality” inflows have doubled in the last six months.

c) Corporate Earnings Pressure

The article highlights the S&P 500’s earnings‑growth gap. In 2023, the S&P’s earnings‑growth rate fell to 4.3 %, the lowest in a decade, while revenue growth was only 2.8 %. This mismatch dampened equity valuations and reduced the equity premium. The piece quotes a recent Morgan Stanley research note that projects earnings to remain sluggish until at least the end of 2025, reinforcing the Treasury advantage.

3. Historical Context

To give readers a sense of how unusual this phenomenon is, the article provides a quick historical look. In the 1980s, during the highest inflation period in U.S. history, Treasury yields outperformed equities for nearly a decade. The article links to a NYTimes retrospective titled “The Inflation Era” that explains how the 10‑year yield peaked at 15 % in 1981, while the S&P 500’s annual return hovered around 10 %.

The author notes that while the current Treasury‑outperforming window is shorter and less dramatic, it signals that the risk‑free asset class is temporarily “worth the price,” especially for conservative investors.

4. What It Means for Your Portfolio

The article is clear that the outperformance of Treasuries does not imply that equities are doomed. Rather, it signals a shift in the risk‑return trade‑off that investors must re‑balance.

1. Re‑assess the Equity Premium: With a higher risk‑free rate, the expected equity premium shrinks. That means the extra return you expect from stocks over bonds is now smaller, reducing the attractiveness of an all‑equity portfolio.

2. Add a Defensive Tilt: The article recommends increasing exposure to defensive sectors that historically perform better in high‑rate environments. It links to a Fidelity research note that shows defensive stocks returned 8.2 % versus 4.6 % for aggressive growth sectors over the last 24 months.

3. Consider Inflation‑Protected Securities: Treasury Inflation‑Protected Securities (TIPS) can offer protection against the inflation that is driving the yield rise. The article links to the U.S. Treasury website where investors can buy TIPS in increments of $5,000.

4. Maintain a Diversified Mix: For those comfortable with moderate risk, the article suggests a 60/40 equity‑bond mix, but shifting slightly toward bonds—e.g., 65/35—might capture the current yield advantage while still enjoying growth potential.

5. Key Takeaways

• U.S. Treasuries have outperformed the S&P 500 in the last 24 months, a rare occurrence that signals a shift in investor sentiment toward risk‑free assets.
• Fed rate hikes, persistent inflation expectations, and geopolitical uncertainty have all contributed to higher Treasury yields and a dampening of equity returns.
• The outperformance is short‑lived and likely tied to a temporary period of elevated risk‑free rates.
• Investors should re‑evaluate their equity‑premium expectations and consider adding defensive stocks or TIPS to their portfolios.

The article ends on a cautious note, warning readers that while Treasuries are currently attractive, the Fed’s policy stance may change, and the S&P 500 could resume its historic dominance. As always, the author advises consulting a financial advisor before making any major portfolio changes.

In sum, News 8000’s piece is a timely reminder that the “home‑country” assets—particularly U.S. Treasury bonds—can become unexpectedly appealing, even outshining the stock market. For investors, staying informed and adapting strategies to the evolving macro environment is key to navigating these waters.