Strategas Research Partners says the S&P 500 can keep shrugging off a rising 10-year Treasury yield until it hits roughly 4.5%, the level that rattled stocks in 2023, 2024 and 2025. The firm's strategists argue the real pain threshold may now sit even higher, given the index's improving internals and the economy's nominal growth rate.
Equity-index futures pointed lower for Tuesday as the bond market selloff pushed Treasury yields toward multiyear highs. Yet the S&P 500 has kept climbing through it, and Strategas chairman Jason Trennert and chief market strategist Chris Verrone say that resilience won't break until yields move much further.
Why the S&P 500 keeps absorbing the pressure
Verrone pointed to the index's internal strength as the reason. He noted that when the S&P 500 hit a prior high on June 2, only 50% of the index traded above its 200-day moving average — a widely watched support level. That figure has since climbed to 75%, even as semiconductor stocks corrected over the same stretch.
According to Strategas's Chris Verrone: "Money doesn't want to leave the asset class of equities." He made the remark in a podcast interview with "Big Short" investor Steve Eisman that aired Monday.
A higher pain threshold than most expect
Trennert and Verrone still expect a 10-year Treasury yield near 4.5% to eventually shake stocks, since that level rattled markets in 2023, 2024 and 2025. But Verrone argued the real trigger point is probably higher now, drawing on history: Japanese government bond yields ran from 4% to 8% in 1989 as the Nikkei melted up, while the 10-year Treasury yield climbed from 4% to 7% during the 1999 dot-com boom.
He added that the current nominal U.S. growth rate — GDP plus inflation — sits around 6.5%, which supports a higher tolerance for rising rates than the market currently assumes.
Concentration risk remains the wildcard
Trennert flagged a separate worry: he said he is personally nervous because the market is so concentrated in tech. He said companies such as Amazon will likely need to tap the bond and equity markets to fund the capital spending their growth targets require, rather than covering it from cash flow alone.
Verrone noted the 10-year yield's trading range over the past 400 days has been the narrowest Strategas has tracked, and said he does not think the current move in yields is explosive enough yet to disrupt equities.
Source: MarketWatch.com – Top Stories
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