Bond yields have started to drop, and there’s a good chance that they’ll keep falling. And when that happens, growth stocks flourish.
And there’s good reason to believe the yield will inch down even more. The bond is still more than 2 percentage points above the expected average annual inflation rate for the next 10 years, which could lure more investors who want a mix of both stocks and bonds as a hedge against the always-risky stock market.
Amazon.com , for instance, has had a negative 74.8% correlation to the 10-year yield in the past four years, according to 22V Research. It makes sense since Amazon is relatively a high-growth stock, with analysts expecting EPS to increase about 30% annually for the next five years, according to FactSet. For the S&P 500, the annual growth expectation is about 8%.
Other tech stalwarts that fit the description include Nvidia , Microsoft , and Advanced Micro Devices . These three have faster expected profit growth than the S&P 500 and correlations of at least negative 60%
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