Traders work on the floor at the New York Stock Exchange in New York City, U.S., April 29, 2024.The volatility in the bond market has had equity investors on their toes for months, but at what point will rising yields spoil stocks' 2024 rally?, according to Goldman Sachs. In a new 19-page paper using market data since the 1980s, the Wall Street firm said when that threshold is reached, the correlation between bond yields and stocks turns negative.
jumped more than expected to start the year. It marked yet another danger sign about persistent inflation, which the market thinks will keep the Federal Reserve on hold until later this year before it starts to consider cutting rates. "Equity valuations are higher and the cycle is more mature so equity markets are very sensitive to moves in bond yields," Goldman said. "They underperform with yields moving higher around news of overheating and higher inflation, while they outperform when the market prices Central Banks to cut interest rates."
After starting the year forecasting at least six reductions in interest rates, the market is now pricing in a 75% chance of just one rate cut, according to the CME Group's widely followedtracker that derives its probabilities from where 30-day fed funds futures are trading. The central bank's rate-setting Federal Open Market Committee began its two-day meeting Tuesday.