Uncle Sam Surpasses the S&P 500 on Risk-Adjusted Basis, Signals Shift in Investor Preference

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  Published in Stocks and Investing on Monday, November 17th 2025 at 8:36 GMT by ABC12
      Locale: UNITED STATES

Uncle Sam Is Outperforming the S&P 500: What the Numbers Mean for Investors
ABC 12 News, Business Section – Published March 27, 2024

When the headline “Uncle Sam is outpacing the S&P 500” first appeared on ABC 12, it was hard to know whether it referred to the U.S. government’s fiscal health, the performance of the Treasury market, or something more figurative. The article turns out to be a straight‑forward comparison of two very different investment classes: U.S. Treasury securities—often nicknamed “Uncle Sam” because they’re issued by the federal government—and the blue‑chip equity index that tracks the country’s largest publicly‑traded companies. The writer uses recent data to show that, for the first time in more than a decade, the Treasury market has outperformed the S&P 500 on a risk‑adjusted basis.

1. The Numbers in Context

The article opens with a concise table that juxtaposes the cumulative return of the S&P 500 over the past 12 months against the average return of the 10‑year Treasury yield. According to data from the U.S. Treasury’s “Yield Curve” database (linked within the piece), the 10‑year Treasury yield has risen from 1.78 % in March 2023 to 3.12 % in March 2024—an increase of 74 basis points. In contrast, the S&P 500’s total return (price appreciation plus dividends) over the same period was a modest 4.2 %.

The article explains that the 10‑year Treasury’s return is not just the yield but the total return that a bond investor would receive, including any capital gains from the decline in bond prices as yields rise. When the author adjusts for the higher volatility typical of equities, the Treasury’s Sharpe ratio—return per unit of risk—is now higher than that of the S&P 500.

The piece also cites a Bloomberg article (link provided) that points out how the U.S. bond market’s “relative performance” has swung in favor of Treasuries for the first time since 2010, when the S&P 500 experienced a sharp correction.

2. Why is Uncle Sam Doing Better?

a. Rising Interest Rates
The Federal Reserve’s recent “rate hike” cycle has lifted the short‑ and mid‑term rates, making newly issued Treasuries more attractive. The article quotes the Federal Reserve’s 2024 Monetary Policy Report, which highlights that the Fed has raised the federal funds rate by 0.75 % over the past year, a move designed to curb inflation. As rates climb, the price of existing bonds falls, but the higher yields compensate investors, especially if they hold until maturity.

b. Inflation Concerns
While inflation has been a concern for equities—compressing profit margins—the Treasury market has proven to be a better hedge against price level uncertainty. The article links to an Investopedia piece that explains the “inflation‑protected” nature of Treasury Inflation‑Linked Securities (TIPS), which adjust both principal and coupon payments with changes in the Consumer Price Index.

c. Fiscal Policy and Debt Levels
The article draws attention to the fiscal deficit, citing a 2024 report from the Congressional Budget Office that projects the national debt to exceed 110 % of GDP by 2026. The writer argues that, paradoxically, the rising debt burden is helping Treasury yields rise faster than stock returns, because bond issuers (the government) need to pay more to attract investors. The piece includes a link to a CNBC interview with a senior Treasury analyst who explains that “government borrowing costs have surged, giving the Treasury market an upside.”

d. Risk‑Aversion in the Market
Investor sentiment has shifted toward safety amid geopolitical tensions—most recently the Ukraine war and North Korean missile tests. The article references a 2024 survey by the Financial Industry Regulatory Authority (FINRA) that shows a spike in demand for “risk‑free” assets. That demand has lifted bond prices, thereby boosting total returns.

3. What Does This Mean for Individual Investors?

The article offers a pragmatic take. “If you’re a long‑term investor, this doesn’t necessarily mean you should abandon your equity holdings,” writes the author. “Rather, it signals a rebalancing opportunity.” The writer recommends considering a small allocation to short‑ to mid‑term Treasuries (5‑10 years) to capture the higher yields without exposing the portfolio to long‑term duration risk.

A sidebar in the piece features a chart from Morningstar that shows the performance of a 5‑year Treasury ETF (SHV) versus the S&P 500 over the last year. The chart underscores the idea that the Treasury ETF outperformed the equity benchmark by roughly 2.5 %, even after accounting for expense ratios.

The article also links to a U.S. Treasury “Tax Guide” that explains how Treasury securities are taxed differently from equities—interest is exempt from state and local taxes, while capital gains are taxable at the federal level. For some investors, this tax advantage could further tilt the risk‑return comparison in favor of Treasuries.

4. Additional Context: Market Trends and Outlook

The writer wraps up by noting that the outperformance is a temporary “phase” in a long‑term trend. The Treasury market’s gains are tied closely to the Fed’s rate path, and if the Fed starts to slow or reverse the rate hikes, the bond yields could flatten, reducing the upside. The article links to a recent piece from the Wall Street Journal that argues “the Fed’s next policy moves will be pivotal for the trajectory of Treasury returns.”

The author also cites a research note from the University of Chicago’s Booth School of Business, which projects that, barring a sudden shock, Treasury yields may continue to outpace the S&P 500 for at least the next 12 months, especially if inflation remains sticky.

5. Takeaway

In summary, ABC 12’s article delivers a clear, data‑driven explanation of why “Uncle Sam”—the U.S. Treasury market—has eclipsed the S&P 500 on a risk‑adjusted basis over the past year. By unpacking the roles of rising rates, inflation, fiscal policy, and risk‑aversion, the piece gives readers a solid foundation for assessing whether they should adjust their own portfolios. Whether the outperformance will persist or fade remains uncertain, but the article makes a compelling case that the government’s bonds have earned a spot in the spotlight—at least for now.