Hi Todd,

I have previously published how I calculate the Equity Risk Premium, both here on Enterprising Investor, as well as in an article for the Financial Times. In the future I will provide a link to either one of those two articles.

For convenience, here is how I calculate it:

Earnings yield (here, I use the inverse of the monthly Shiller CAPE ratio) - the monthly 10-year US Treasury rate = equity risk premium

These figures currently are as follows:

Monthly Shiller CAPE as of 1 January 2018 = 32.47
Earnings yield = 1 / 32.47 = 0.030797659
Monthly 10-year US treasury rate as of 1 January 2018 = 0.0256, so that subtracted from the earnings yield is my calculation for the equity risk premium = 0.005197659

Less interesting than the current level is the current level as compared to the time series. The last time that it was at or less than 52 basis points was the month of June 2008 when it stood at 0.36%. The last month in which it was actually negative was December 2007 when it stood at -25 basis points. You may recall that was the market peak just prior to the Great Recession.

Hope that helps!

Jason