Which 10-year yield level will really start to hit stocks? Here's what history suggests
The record suggests that the 10-year yield will have to approach 7% in order to meaningfully hurt stocks, according to Bank of America.
TL;DR
- Investors are concerned about the impact of rising U.S. Treasury yields on stocks.
- Higher bond yields offer investors an alternative to risky equities and can lower future company profits.
- Stocks have shown resilience despite current multi-decade high yields.
- Bank of America data suggests the 10-year Treasury yield must approach 7% to significantly hurt stocks.
- Historically, S&P 500 forward price-to-earnings multiples have remained stable when the 10-year yield is between 0% and 7%.
- The multiple drops significantly once the 10-year yield exceeds 7%.
- Strategists anticipate continued pressure on the bond market due to expectations of higher Federal Reserve rates, robust growth, and inflation.
- Bank of America remains underweight duration and short 2-year rates.