Stocks lose edge over bonds as equity risk premium shrinks, raising market caution.

The extra return investors get from stocks over bonds, known as the equity risk premium, has been shrinking. This decline is causing concern on Wall Street that investors may be too complacent amid the stock market's recent rally. Despite rising bond yields due to inflation fears linked to the Iran war, the S&P 500 remains near record highs. Both stocks and Treasury bonds rallied recently as bond yields fell with retreating oil prices, signaling mixed market signals ahead.