The 'equity risk premium' (ERP) – the historical excess return of stocks over bonds – has reportedly disappeared. This metric, often used to justify higher equity valuations, is now at or near zero, indicating that investors are no longer being compensated for taking on the additional risk of owning stocks compared to safer fixed-income alternatives. This shift is primarily driven by rising bond yields, making fixed income more attractive on a relative basis.

Despite this fundamental change in valuation dynamics, individual investors continue to show robust demand for equities, having enjoyed substantial gains over the past two years. This creates a second-order setup where the market's resilience could be tested if institutional flows or a shift in retail sentiment begin to align with the altered risk premium landscape. The key question now is whether retail enthusiasm can continue to defy traditional valuation metrics, or if the lack of an ERP will eventually trigger a rotation.