Rising Treasury Yields Pose Biggest Threat to Equities Since 2008
The 3-month correlation between the 10-year Treasury yield and the S&P 500 has reached -0.62, the most negative in at least 15 years, meaning stocks fall when yields rise.
The correlation between the 10-year Treasury yield and the S&P 500 has reached its most negative level in at least 15 years. A reading of -0.62 means that when yields rise, stocks now fall, and vice versa. This is a stark change from the 2022 bear market, where the correlation never crossed -0.50.
During the post-2008 Financial Crisis period, yields and equities moved together, supported by economic growth and strong earnings expectations. Today, rising yields reflect surging inflation fears rather than growth optimism, which weighs on stock valuations rather than signaling economic strength.
The bond market is now the key signal to watch, as the current yield move is acting as a headwind for equities.
Source: The Kobeissi Letter