Construct a bond-led dividend-to-bond-yield regime first

Start with a bond-led frame

Before any single equity chart is read, intermarket-analysis places one equity position inside a cross-market regime by pairing stock dividend yield with long-maturity bond yield, plus their relative movement, instead of treating the stock chart as a standalone object.

The construction treats the cash dividend as relatively fixed over many months, so equity prices do the short-run work of adjusting dividend yield when bond yields change. Because the equity claim is treated as open-ended, the comparator is a long-maturity bond yield, specifically maturities longer than 10 years or a composite of such yields, set against a broad equity-index dividend yield.

Read the two yields together

A 32-year monthly overview showed the two yield series generally moving together, with bond yields often turning first. 1959 was marked as the first full year in that history when bond yields stayed above stock dividend yields.

In the later part of that history the ratio of stock dividends to bond yields was described as trading in a 30-50% range. That long overview is the first placement of the pair, not a reason to open the equity chart on its own.

Add a 12-month change gap

Rate-of-change is the chart-scale signal that compares the 12-month percentage change in long bond yields with the 12-month percentage change in equity dividend yields to test whether the two series are tracking, lagging, or diverging.

Twelve-month rates of change in average monthly long-bond yields and stock dividends generally tracked each other across calendar episodes such as the inflationary 1970s and the debt-heavy 1980s. The bond-yield rate of change often led the dividend rate of change, especially in the 1980s.

High 12-month dividend rates of change clustered near equity-market lows in 1974 and 1989, because that rate of change rises when stock prices fall. The change gap is part of the regime frame, not a standalone entry rule.

Locate the ratio in a multi-year band

Over a five-year window the equity-index dividend yield averaged 39.1% of composite long-bond yields, with a standard deviation of 3.2%. The historically typical zone was drawn as 39.1% plus or minus 1.6%, or 37.5-40.7%. That corridor is the half-band-valuation-zone: the multi-year average of the dividend-to-bond-yield-ratio plus or minus half of its standard deviation, treated as the historically typical zone of the sample.

In third-quarter 1987 the dividend-to-bond-yield-ratio was unusually low, and that gap later closed after a sharp equity-price decline returned the ratio toward its average. In late 1990 the same five-year ratio reached 45, two standard deviations above its average. Readings below 37.5% were classified as moving toward overvaluation, and the constructed ratio was in that direction during January-February 1992.

Keep the frame on a calendar cycle

Seasonality-analysis is a calendar-windowed regime overlay that uses 12-month change windows and dated multi-year episodes so the current dividend-to-bond-yield construction is read against a weeks-to-months cycle rather than a single print.

The inflationary 1970s, the debt-heavy 1980s, the third-quarter 1987 gap, the late-1990 stretch, and the January-February 1992 reading are the dated windows that keep the finished frame inside that cycle.