U.S. Treasury yields have been climbing, with the 10-year note hitting 5.230%, the highest since June 2007, and the 30-year yield surpassing 5.51%, levels not seen since 2004. This rise has left Wall Street divided on the underlying causes, whether it be persistent inflation, strong economic growth, or a growing deficit.
Strong economic surveys, particularly in manufacturing, have led some investors to believe that the economy is robust enough to handle higher rates, which could be a positive sign for equities, especially tech stocks. Dennis DeBusschere from 22V Research suggests that while growth may slow, it will be gradual, potentially lowering inflation risks and benefiting equities in the long run.
However, concerns remain about the sustainability of consumer spending as they face rising bond yields and stagnant wages, with the average 30-year mortgage rate climbing to 7.45%. Portfolio manager Justin Bergner warns of potential downside risks in the market, suggesting that higher interest rates could lead to a reset in asset prices.
The upcoming economic reports, including the personal consumption expenditures price index and the September jobs report, will be crucial in determining the market's direction and the Federal Reserve's next moves