Multiple market forces are aligning in favor of continued stock gains — and they all trace back to record-low bond yields, according to a top Wall Street strategist | Markets Insider

performs the best when yields are in their lowest quartile. Annualized total returns reach 19.8% for the index when yields are so low, compared to just 9.5% in the second-lowest quartile and 5.4% in the second-highest quartile. The benchmark index also posts monthly losses less frequently when yields are at their lowest, Paulsen highlighted.

Perhaps more surprising is how the market outperforms when earnings decline and yields are at their lowest. While all other yield quartiles see S&P 500 average annualized monthly returns turn negative, the index gains 10.7% on months when profit fall and yields are in their lowest quartile.

Additionally, S&P 500 earnings decline far less frequently when yields are in their lowest quartile. The index's trailing 12-month EPS falls just 32% of the months when yields are at their lowest, compared to nearly 40% when yields are in their middle two quartiles and nearly half of the time when yields are in their highest quartile, according to Paulsen.Finally, low-yield environments are a boon for the market's biggest driver: tech giants.

Since tech stocks have driven major indexes' rallies — and brief slumps — over the past few months, their outperformance in low-yield environments stands to lift the broader market so long as yields stay low.

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