Yahoo Finance
With the S&P 500 (^GSPC) roughly 2% away from its all-time closing high, investors may be wondering whyrising bond yieldshaven't dealt a heavier blowto stocks— and if the rally from the first eight months of the year still has legs.
"The markets that have been taking their cues from the …strong earningsenvironment that we've seen," Jeff Schulze, head of economic and market strategy at ClearBridge Investments, told Yahoo Finance.
He pointed to the strength in S&P 500 (^GSPC) earnings, which rose 52% year over year in the second quarter.
" I think that that's going to continue, and we're going to see positive market momentum," he added.
Schulze points to encouraging historical trends showing that when the stock market starts out strong, it typically ends strong.
"When the S&P 500 has gained more than 10% through August, it has advanced from September through December in 25 of 28 instances, an 89% positive hit rate," Schulze and his team said in a recent note.
The S&P 500 has edged lower from its mid-August highs, but remains within roughly 2% of its record close.
Four of this past week's trading days ended lower as the 10-year Treasury yield touched itshighest level since 2023amidsurging oil prices.
But rising long-dated bond yields haven't dented the stock market all that much, perhaps because of what's behind the move.
Schulze noted that the recent rise in the 10-year Treasury yield (^TNX), a benchmark for long-term interest rates and mortgages, has been driven primarily by higher real rates, or rates adjusted for inflation.
That move reflects a combination of stronger economic growth, a booming AI infrastructure build-out, and a repricing of the Fed's policy path, rather than a spike in inflation expectations or a fiscal credibility shock.
"If current yields were signaling a material threat to the economy, stocks would likely be much lower due to a corresponding reduction in earnings expectations," Schulze wrote.
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