The bull market enters 2025 under threat from a familiar menace over the years: rising interest rates. History has shown that when the 10-year Treasury yield rises to its current levels, equity returns begin to turn negative. After a banner year for stocks, the broader S & P 500 benchmark ended December in the red, in part due to pressure from a jump in yields after the Federal Reserve indicated earlier this month that it may slow down the pace of interest rate cuts in the new year.
Since the 2020 yield low, stocks have advanced a cumulative 117% over 1,754 days, according to Evercore ISI. However, stocks slipped 2.1% over the 89 days when the 10-year Treasury yield rose above 4.5%, and shed 3.7% over the 20 days the 10-year Treasury yield traded at above 4.75%, the firm said.