When will higher Treasury yields pressure equities?

Treasury yields are up significantly this year, driven by higher energy prices, a resilient economy, and increased bond issuance. The 10-year yield recently hit its highest level since 2002, prompting questions about when these higher rates will pressure equities.

Historically, yields and stocks moved together until yields crossed a certain threshold. The article suggests this threshold has lowered over time, from 4.5% pre-2008 to 3.5% in the post-2009 era. However, since mid-2021, the relationship has become less predictable.

The article notes that the market's focus has shifted, particularly with the dominance of a few large tech companies driven by AI. These companies' ability to fund capital expenditures and monetize new technology may decouple their performance from broader interest rate movements, at least for now. Investors should watch AI adoption and the hyperscalers' monetization efforts.