For four years, tech has been the answer to almost every question about this bull market U.S. stocks have spent four years charging higher on the promise of technology and artificial intelligence. Now, they need to prove they are worth more than a 5% return on one of the world’s safest assets. The S&P 500 has climbed a stunning 118.4% since Oct. 12, 2022, when the large-cap index hit its bear-market closing low of 3,577.
At its current level of 7,811, the index has doubled in four years, while showing few signs of slowing down. Yet with the bull market ready to blow out four candles this week, surging Treasury yields have been raising doubts on Wall Street about how much further stocks can climb from here. Ethan Allen’s CEO on Effective Leadership Strategies Play video: Ethan Allen’s CEO on Effective Leadership Strategies At the index level, stocks brushed off weeks of pressure from the bond market, with the S&P 500 ending at a fresh record on Friday — even with 10-year and 30-year Treasury yields near their highest levels in more than two decades.
The bullish case now is that the scale of the AI build-out and continued robust earnings growth from AI leaders can keep outrunning the macro gravity weighing down much of the rest of the equity market. Don’t Short Yourself offers weekly money tips to help you earn it, stack it and grow it. I would like to receive updates and special offers from Dow Jones and affiliates.
I can unsubscribe at any time. There’s also hope that rising interest rates will recede along with elevated oil prices and sticky inflation — if an end to the Iran war can be found. Yet the prevailing trend in long-dated yields clearly matters to long-term equity returns, said Jordan Rizzuto, managing partner and CIO at GammaRoad Capital Partners.
Rising long-term interest rates pose risks to the current bull market since they pressure stock valuation, raise borrowing costs for corporations and increase competition for investor money. Higher rates reduce the present value of future cash flows. That makes the risk particularly relevant to the AI-driven rally, which rests on expectations of exceptional future earnings growth.
Rising yields also push up borrowing costs on corporate loans, meaning companies would see more of their cash go toward interest payments — leaving less in profits, investments and shareholder returns. Still, the risk isn’t that stocks suddenly collapse, but that money slowly drifts elsewhere, Rizzuto told MarketWatch on Friday. Since 1950, bull markets that made it that long tended to do well in their fifth year, delivering an average gain of nearly 19%, according to data compiled by Carson Investment Research.
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