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Surging Bond Rates Threaten to Muzzle Dip-Buying Stock Bulls

  • Tech index’s Fed model shows bonds becoming more attractive
  • Ample alternatives to stocks are quickly appearing: O’Rourke
The Nasdaq MarketSite in New York, U.S.
The Nasdaq MarketSite in New York, U.S.Photographer: Victor J. Blue/Bloomberg

A valuation case that has fueled a near-tripling in the Nasdaq 100 Index is coming under increasing pressure, with surging interest rates threatening to dent equities’ there-is-no-alternative argument. 

While the stock-bond valuation picture still leans toward shares from a longer-term historical lens, it is currently being clouded by the biggest weekly run-up in 10-year Treasury yields in a year. Their surge has shrunk the advantage of the tech-heavy index’s earnings yield relative to the benchmark rate to the lowest level in over three years.