Analysis-Rising Treasury yields pose a test for richly valued US stocks

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Carbon tax protest at Nova Scotia-New Brunswick border | SaltWire #newbrunswick #novascotia #rallyNEW YORK - Rising Treasury yields could provide the latest test for a rally that has made U.S. stocks increasingly expensive while taking them to fresh record highs.

"The fact that are breaking above a previous ceiling here is giving pause," said Chuck Carlson, chief executive officer at Horizon Investment Services."The trend of these rates is disconcerting because you have this continued series of higher highs here that is being perpetuated today." Futures markets on Tuesday showed investors pricing in around 70 basis points in cuts this year, compared to more than 150 bps in January. That is less than the 75 bps the central bank projected for this year.The equity risk premium - which compares the S&P 500 earnings yield against the 10-year Treasury yield - turned negative in the first quarter for the first time since 2002, said Keith Lerner, co-chief investment officer at Truist Advisory Services.

"We have been looking for a 3-5% correction for months," said Paul Nolte, senior wealth advisor and market strategist for Murphy & Sylvest Wealth Management."We may finally be at the doorstep."

 

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