Will rising corporate bond yields put pressure on US equities?

The earnings yield of a stock market index should be closely related to the average real yield of long-dated bonds issued by its constituents. In the US, we think the latter is likely to rise significantly during our forecast window. Although the gap between the earnings yield and the average real bond yield is currently more positive than usual, upward pressure on the latter is set to undermine the valuation case for equities over the next few years.