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Larry Hatheway

Why Stocks Can Shrug Off Bonds

As long as growth and inflation expectations move within acceptable ranges, equities will probably grind higher.
On a run.

On a run.

Photographer: Spencer Platt/Getty Images

This year, equity markets have broadly advanced, despite significant gyrations in bond yields. That seems odd to some: How can stocks ignore bond moves, in particular episodes of rising yields?

Contrary to prevailing opinion, equity investors have been right to mostly ignore the bond market this year. To understand why, it's worth considering how bond yields and equity prices ought to behave.