Legendary professor and author Jeremy Siegel elaborates:
But there is a critical difference between the earnings yield on stocks and the current yield bonds. Bonds, except for a small part of the treasury market called "inflation protected bonds," are promises only to pay dollars. No matter what the growth in the economy or what the rate of inflation, the payment of the principal or the interest will never increase, and could fall if the paying entity has financial problems.Stock returns are much different. Stocks are claims to real assets -- land, capital, property, ideas, trademarks and patents, among other assets that produce real goods and services. Over long periods of time the evidence is overwhelming that the price of stocks will keep up with rising prices of the goods and services firms produce. As a result, the return on stocks is best described as a "real" return, and not just a nominal or money, such as bonds offer investors.