London Daily

Focus on the big picture.
Saturday, Jul 12, 2025

The stock market sure is acting strangely

The stock market sure is acting strangely

Wall Street is having a topsy-turvy moment. Long-term Treasury yields have shot up dramatically, and investors in stocks are cheering the bond market's big moves. That doesn't happen often. So what gives?

Rising rates are supposed to be a bad sign for stocks. In theory, higher yields for the 10-year US Treasury should make it more expensive to get mortgages and other types of consumer and business loans.

Spiking bond yields are also often associated with higher inflation — a big problem for consumers lately — and they are rising now amid concerns that the Federal Reserve will jack up short-term interest rates to keep surging prices in check. That's also not a welcome sign for stocks.

Granted, rates are still historically low, with the 10-year currently yielding only about 1.69%. That's a reason why Peter Wilson, global fixed income strategist with the Wells Fargo Investment Institute, recently called the relationship between yields and high inflation an "odd couple."

But look at how far and how quickly rates have risen in a short period of time. The 10-year yield is up from 1.51% last Friday and was a mere 0.92% at the end of 2020. That means bond yields have shot up more than 10% in just a few days and 80% in a little more than a year.

It appears that investors don't expect bond yields to climb much higher from current levels though, even if the Fed raises short-term rates several times this year. That could fuel further gains in the stock market.

Yields may not have that much further to climb


Ameriprise chief market strategist David Joy wrote in a 2022 outlook report this week that bond yields "are expected to come under further upward pressure" this year. He believes they may top out around 2%, which would lead to "uninspiring returns" from Treasuries.

Few are predicting the type of shock that would lead bond yields to move substantially higher. Experts believe stocks still look more attractive than bonds because the global economy is expected to continue its recovery from the Covid-19 pandemic.

That should lead to stronger earnings — possibly accompanied by higher inflation.

"We expect interest rates to move modestly higher in 2022 based on near-term inflation expectations above historical trends and improving growth expectations once the impact of Covid-19 variants recede," said Lawrence Gillum, fixed income strategist for LPL Financial, in a 2022 preview report.

Gillum added that he expects the 10-year Treasury yield to end 2022 close to current levels, at 1.75% to 2%.

"An aging global demographic that needs income, higher global debt levels and an ongoing bull market in equities may keep interest rates from going much higher," Gillum wrote.

That desire for more income from investors who have retired or are preparing to as part of the so-called Great Resignation could push sectors of the stock market even higher, said JPMorgan Funds chief global strategist David Kelly in a 2022 preview report.

Kelly noted that international stocks in particular tend to pay dividends that yield much more than US bonds and stocks. He said alternative assets like real estate and commodities may do better than bonds, too.

"Entering the New Year, a good resolution would be to rebalance across domestic stocks, international stocks, fixed income and alternatives," Kelly wrote, "both to enhance long-term return prospects and to protect against the surprises that 2022 may bring."

Newsletter

Related Articles

0:00
0:00
Close
Reparations argument crushed
Rainmaker CEO Says Cloud Seeding Paused Before Deadly Texas Floods
A 92-year-old woman, who felt she doesn't belong in a nursing home, escaped the death-camp by climbing a gate nearly 8 ft tall
French Journalist Acquitted in Controversial Case Involving Brigitte Macron
Elon Musk’s xAI Targets $200 Billion Valuation in New Fundraising Round
Kraft Heinz Considers Splitting Off Grocery Division Amid Strategic Review
Trump Proposes Supplying Arms to Ukraine Through NATO Allies
EU Proposes New Tax on Large Companies to Boost Budget
Trump Imposes 35% Tariffs on Canadian Imports Amid Trade Tensions
Junior Doctors in the UK Prepare for Five-Day Strike Over Pay Disputes
US Opens First Rare Earth Mine in Over 70 Years in Wyoming
Kurdistan Workers Party Takes Symbolic Step Towards Peace in Northern Iraq
Bitcoin Reaches New Milestone of $116,000
Biden’s Doctor Pleads the Fifth to Avoid Self-Incrimination on President’s Medical Fitness
Grok Chatbot Faces International Backlash for Antisemitic Content
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
US Imposes New Tariffs on Brazilian Exports Amid Political Tensions
Azerbaijan and Armenia are on the brink of a historic peace deal.
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Weinstein Victim’s Lawyer Says MeToo Movement Still Strong
U.S. Enacts Sweeping Tax and Spending Legislation Amid Trade Policy Shifts
Football Mourns as Diogo Jota and Brother André Silva Laid to Rest in Portugal
Labour Expected to Withdraw Support for Special Needs Funding Model
Leaked Audio Reveals Tory Aide Defending DEI Record
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
Music Banned by Henry VIII to Be Performed After 500 Years
Steve Coogan Says Working Class Is Being ‘Ethnically Cleansed’
Home Office Admits Uncertainty Over Visa Overstayer Numbers
JD Vance Questions Mandelson Over Reform Party’s Rising Popularity
Macron to Receive Windsor Carriage Ride in Royal Gesture
Labour Accused of ‘Hammering’ Scots During First Year in Power
BBC Head of Music Stood Down Amid Bob Vylan Controversy
Corbyn Eyes Hard-Left Challenge to Starmer’s Leadership
London Tube Trains Suspended After Major Fire Erupts Nearby
×