Some strategists say stocks are overly reliant on the bond market and ignoring a strong earnings story that could propel stocks to new highs this year. Investors have been worried about the state of the bond market all month. The U.S. 10-year Treasury yield is approaching the key 5% level, a move that traders fear could take stocks sharply off recent highs. The Dow Jones Industrial Average is more than 4% above its December record, while the S&P 500 and Nasdaq are 2% and 3% below their all-time highs, respectively. U.S. 10-year 5D Yamagata U.S. 10-year Treasury yields But stocks soared on Wednesday and bond yields retreated on Wednesday after December core consumer inflation data came in weaker than expected, soothing concerns that sticky inflation could hurt corporate profits this year. Prospect investors. After last year’s wild swings, stocks will rely more heavily on company fundamentals in 2025 to justify further gains. As a result, some strategists believe investors should start focusing more on earnings growth prospects – driven by rising productivity and the incoming administration’s pro-business policies – rather than rising bond yields. “We’re in an environment where long-term bond rates are likely to go higher,” Savita Subramanian, head of U.S. equities and quantitative strategy at Bank of America, told CNBC. “But I don’t think we should be concerned about that. “From a stock investor’s perspective, interest rates can go higher because of growth, because of productivity, because of all kinds of good things,” Subramanian said. “I think as long as it’s a gradual tilt, as we’ve seen so far, it’s OK,” she added. .SPX 1D Mountain S&P 500, Over 1 Day This strategist sets year-end target for S&P 500 Set at 6,666, he said investors were too focused on the 5% number and the Fed’s path for interest rates – at a time when deregulation and productivity gains could offset any inflationary pressures. “We’re also in an environment of deregulation, productivity, etc., and those are the issues we should be focusing on, not just what the Fed is going to do in the next three months or six months. I think the Fed is relevant “But maybe too focused on that, in this environment, we’ve actually seen margins hold up very well despite the wild swings in inflation that we’ve seen, which I think is evidence that the company is improving productivity,” Nia said. Our analysts think that trend is continuing. Maybe artificial intelligence will help, but the trend is here and I think that’s where we need to be more optimistic, not just in the 10-year Treasury. Will yields hit 5%? Earnings season begins this week, adding support to the market’s bullish streak, with big banks reporting earnings on Wednesday that beat Wall Street expectations this week. investors. In fact, JPMorgan posted record profits, according to FactSet, which includes forecasts for companies that have reported and those that have not yet reported. ) implies a 12% year-over-year increase in the fourth quarter. To be sure, rising bond yields will likely continue to weigh on the U.S. 10-year Treasury note as investors snap up U.S. Treasuries to lock in higher yields. Yields were last hovering above 4.6% after falling sharply from the 4.8% level earlier this week. However, some are unfazed, citing a pullback – even a 10% one. Corrections are a natural part of the market cycle. “If bond yields reach 5% and stocks continue to fall, then I will buy both,” said Chen Wei, chief global strategist at Alpine Macro. ” “I would buy stocks and bonds. ” Zhao expects the S&P 500 index may rise 5% to 6% by the end of the year, adding: “I’m not worried about it. “
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