The Zhitong Finance APP notes that as the U.S. 10-Year Treasury Notes Yield approaches the levels that have caused significant pain for the stock market in recent years, there is still room for further decline in the U.S. stock market.

The U.S. 10-Year Treasury Notes Yield has risen to slightly below 4.7%, having increased by more than a percentage point almost continuously since mid-September, reaching the highest level since April.

This trend is similar to the situation in 2022 and 2023, when global stocks fell sharply. However, this time the stock market has only paused briefly, and if the yield continues to surge, there is still room for a market decline.

Goldman Sachs strategist Christian Müller-Griesmann wrote in a report, 'The correlation between Stocks and Bonds yields has turned negative again.' He emphasized that if yields continue to rise without good economic data, it will hit the stock market. 'Given that the stock market has been relatively resilient during the bond sell-off, we believe the risk of a short-term pullback will increase if negative growth news emerges.'

Strategists pointed out that as the yield curve steepens, long-term interest rates see the largest increases, indicating market concerns about U.S. fiscal and inflation risks. Most of the increase comes from real yields rather than breakeven inflation.

Expectations for future monetary policy may also fluctuate further. The market has repriced the number of U.S. rate cuts, anticipating only one cut of 25 basis points in July. The FOMC meeting minutes released later Wednesday may provide clues regarding the policy outlook.

So far, the market seems to believe that the 'Goldilocks' scenario of falling prices, economic recovery, and gradual policy easing will prevail. Most investors are very optimistic about 2025, especially regarding the U.S. stock market, while ignoring the potential inflationary pressures from tariffs and U.S. policies under the new government.

UBS Group strategist Gerry Fowler stated, 'It all depends on real yields rather than inflation. It also depends on the long term rather than the short term, indicating that the market is currently very optimistic about the improvement in U.S. productivity, with little concern about escalating tariffs.'

Editor/ping