Thirty-year Treasury Inflation-Protected Securities (TIPS), which provide returns above inflation, now offer real yields of about 3.35%, according to Jeremy Siegel, Wharton School finance professor and chief economist at asset manager WisdomTree. Siegel said stocks still outperform bonds, but the advantage is narrowing as Treasury yields reach levels last seen in 2002. At a market valuation of 20 times earnings, stocks offer an estimated 5% return above inflation, leaving about 1.65 percentage points of compensation for taking equity risk. The 10-year Treasury yield touched 5.33% on Thursday, according to Bloomberg. Siegel said the Magnificent 7 benefit from profit margins of 50% to 70%, while companies outside technology earn margins of 7% to 10%, making higher borrowing costs more damaging for the broader market. About 75% of S&P 500 stocks fell in September even as the index edged higher. Siegel, who urged a September rate increase, said the Federal Reserve needs two more increases this year, compared with one in the central bank’s projections. He suggested Fed Chair Kevin Warsh could support skipping October and delivering a half-point increase in December, while Fed Vice Chair Philip Jefferson said officials may need more time to assess the next move. Robert Kaplan, a Goldman Sachs vice chairman and former Dallas Fed president, said traders already demand a premium for uncertainty surrounding Warsh. If real yields remain near 3%, stocks may require stronger earnings to support current valuations.