This is the most important question in markets right now

Among everything else going in markets in the US and abroad, it really just comes down to one question: do you want to own stocks or bonds?

In an email on Thursday afternoon, Rich Barry at the NYSE pointed out the following:

Market factoid: The yield on the 10-year US Treasury Note is exactly the same as the dividend yield on the S&P 500, (1.9%). The average multiple of the 10-year yield to the S&P yield is 2X, going all the way back to 1970. Which begs the question: Is the S&P 500 still too cheap/undervalued; or is the 10-year note over-valued??

On Thursday afternoon, the 10-year was back up above 2% and the S&P 500 was roughly unchanged, so this 1:1 comparison is slightly out of whack, but this dynamic doesn't change overnight. You still get roughly the same yield from both.

And so the question Barry is putting forth is really the most fundamental way to think about the value of stocks vs. bonds.

When you hold stocks over an extended period, you may get some capital appreciation as stock prices rise, but this is an uncertain prospect. What you can count on for returns from your investment are dividends (unless you own some mining companies, which have been slashing dividends).

So: would you rather get 1.9% per year from the S&P 500 and take your chances on capital appreciation, or do current valuations - the S&P 500 trades at about 19 times forward earnings - scare you enough that getting 2% from Treasuries seems like a better deal?