Komunyu J.

Put away your white clothes and your barbecues, now that summer is (unofficially) over with Labor Day in the rear-view window. Most of Wall Street's attention is still on Friday's jobs report, which showed a Goldilocks-like combination of a slowing labor market but not one tail-spinning into a recession.

Analysts at BMO point out the S&P 500 earnings yield — that's earnings-to-price, rather than price-to-earnings — is now barely above the yield on the 10-year Treasury "Declining earnings yields compared to rising Treasury rates and the risk implied by the full faith and credit of the U.S. (even after the downgrade), begs the question of how long this dynamic can persist before returning to more historically typical levels either via higher earnings yields or lower 10-year yields," they say.

The initial price action on Tuesday is pointing toward the former — if stocks fall, the earnings yield rises — but for the call of the day, we'll head to the team at UBS, who say they are bullish on bonds. (The BMO team is as well; they're targeting the mid-August low in the 10-year of 3.95%.)

"Recent volatility in U.S. rates has raised the question of whether we are on the verge of a bear market for bonds. We do not share this view and think nominal yields will fall over our six- to 12-month forecast horizon for a number of reason," say the UBS team led by Mark Haefele, global wealth management chief investment officer.

First, they point to Jerome Powell and crew over at the Federal Reserve, and say monetary policy is restrictive. They note that inflation-adjusted interest rates are now positive, at levels not seen since the 2008 financial crisis, and mortgage and credit card rates are at multi-decade highs.

Next they say inflation is falling and will continue to do so. Housing inflation — though reflected in official numbers with a lag — is cooling, and goods inflation was negative in July.

Put away your white shirts and grills, since summer is (unofficially) ended with Labor Day in the rearview mirror. The majority of Wall Street's focus remains on Friday's jobs report, which revealed a Goldilocks-like combination of a slowing labor market but no tailspin into a recession.

According to BMO analysts, the S&P 500 earnings yield – earnings-to-price rather than price-to-earnings — is now just over the yield on the 10-year Treasury "Declining earnings yields compared to rising Treasury rates, as well as the risk implied by the United States' full faith and credit (even after the downgrade), beg the question of how long this dynamic can last before returning to more historically typical levels, either through higher earnings yields or lower 10-year Treasury yields."