Saudi Press

Saudi Arabia and the world
Friday, May 09, 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

Saudi Press
0:00
0:00
Close
Common Sense Returns to Britain's Legal System: UK Supreme Court Declares a Woman Is… a Woman
Warren Buffett to Step Down as Berkshire CEO After Nearly 60 Years
Trump Shares AI-Generated Image of Himself as… Pope, Prompting Outrage Reaction
Amazon Launches Satellite Internet Service Amidst Competition with SpaceX
The Rush to the White Gold: Global Investment Surge in Natural Hydrogen Exploration
Trump Administration Removes National Security Adviser Mike Waltz Amid Signal Chat Controversy
Liverpool Clinches Record-Equalling 20th English League Title Under Arne Slot
Massive Explosion at Iran's Bandar Abbas Port Linked to Suspicious Chemical Shipments
Pope Francis Laid to Rest in Rome as World Leaders Attend Funeral
Not Child’s Play: How Competitive Gaming Became a Global Economic Empire
California Surpasses Japan to Become the World’s Fourth-Largest Economy
Former U.S. Congressman George Santos sentenced to eighty-seven months for wide-ranging fraud
Israel Considers Limited Strikes on Iran's Nuclear Facilities Amid Diplomatic Efforts
Saudi Arabia Offers Max Verstappen Unprecedented Deal to Join Aston Martin
Global Pistachio Shortage Amid Rising Demand for 'Dubai Chocolate'
IMF Predicts No Global Recession Amid Trade Tensions
Worldwide Markets Decline as U.S.-China Trade Frictions Intensify
OpenAI Lands Unprecedented $40 Billion Investment
Removing the Political Adversary is Dismantling What's Remaining of Turkey's Economy.
Ex-FIFA President and French Football Icon Acquitted of Corruption Allegations
White House Investigates Security Breach After Journalist Accidentally Added to Secret Yemen Strike Chat
Volunteers in Jeddah Ensure No One Goes Hungry During Ramadan Iftar
New Restaurant Opens in Makkah's Iconic Clock Tower for Ramadan Iftar
Saudi Arabia's Project Masam Removes 552 Houthi Mines in Yemen
Saudi Arabia Fines Over 400 Foreign Trucks for Regulatory Violations
Saudi National Campaign for Charitable Work Reports Significant Donations in Ramadan
Historic Al-Hosn Al-Asfal Mosque Restored in Asir as Part of National Heritage Initiative
KSrelief Expands Humanitarian Efforts in Syria, Sudan, and Lebanon
Saudi Arabia Advocates for Global Water Cooperation at Forum
Madinah Governor Tours Islamic Arts Biennale in Jeddah
Saudi Foreign Minister in Cairo to Lead Meeting on Gaza Developments
Recognition of Saudi and Pakistani Entrepreneurs at Riyadh Ceremony
UAE Announces $1.4 Trillion Investment Plan in the United States
Saudi Arabia Innovates in Soil Quality and Water Conservation
Governor of Taif Engages with Rose and Aromatic Plants Cooperative
Saudi Food and Drug Authority Enhances Preparations for Hajj Season
Saudi Arabia Distributes Aid to Yemen and Romania
Restoration of Historic Al-Qalaah Mosque in Riyadh Underlines Heritage Preservation Efforts
Saudi Arabia Arrests Over 25,000 for Immigration Violations in One Week
UAE’s ADQ and Energy Capital Partners Announce $25 Billion Energy Venture in the U.S.
KSrelief Launches Extensive Ramadan Food Aid Initiative
Ramadan Celebrations Revitalize Historic Jeddah
Makkah Authorities Urge Worshippers to Follow Crowd Management Guidelines
Direct Flights Between Dammam and Damascus Reestablished for Syrian Residents
Saudi Main Index Rises to Close at 11,760 Amid Mixed Market Performance
Moroccan Prime Minister Aziz Akhannouch Visits Prophet's Mosque in Madinah
Cultural Development Fund Hosts Third Annual Storytellers Event in Riyadh
Investment Surge in Fintech, Gaming, and Health Care Across MENA Region
Surging Prices for Religious Tourism in Saudi Arabia Amid Ramadan Rush
Middle Eastern Airlines’ Fleet Projected to Surge Above Global Growth Rates
×