U.S. stocks are holding up even as the 10-year Treasury yield climbs to its highest level in nearly 20 years, a divergence that is pushing investors to revisit the historical relationship between rising bond yields and equity performance, according to BlockBeats on Sept. 27.
The report said the S&P 500 has not taken an obvious hit despite the jump in yields, challenging the view that higher Treasury yields necessarily lead to weaker equities.
Past episodes show different market reactions
History suggests rising yields do not automatically send stocks lower. In 1994, Federal Reserve rate hikes triggered a bond selloff, and the S&P 500 fell about 8% at one point. It later recovered those losses as the economy and corporate earnings remained resilient.
In 2016, markets treated higher yields as a signal of economic recovery and policy normalization, and U.S. stocks rose alongside Treasury yields. The pattern was different in 2022, when aggressive Fed tightening weighed on both bonds and equities, and the S&P 500 posted a sharp decline.
AI investment is cited as a current support
For 2026, the report said U.S. equities are again dealing with a mix of rising yields and resilient economic growth. Large-scale spending by technology companies on AI infrastructure is described as a support for both the economy and the stock market.
The report also said a U.S.-Iran agreement that has pushed oil prices lower could help ease inflation pressure. At the same time, more pessimistic views hold that the Federal Reserve may need to keep raising rates until stocks and overall financial conditions are restrained enough.
Bank of America strategist flags strong risk appetite
Meghan Swiber, a rates strategist at Bank of America, said stocks and other risk assets are still performing strongly and have not yet sent the Federal Reserve a clear signal that demand is slowing.