Treasury yields have continued to rise since February, but the trend has eased recently. As a result, there are many voices in the market who think that US bond yields have peaked and that spring for technology stocks is coming again.

However, Goldman Sachs Group has a different view on this, and warned: "do not fight against the Fed." "

Goldman Sachs Group analyst David Kostin pointed out in the weekly report that since the beginning of this year, interest rates, inflation and taxes are the three major macro issues that dominate the trend of US stocks, of which interest rates are the most important factors.

Short-term assets outperformed long-term assets in both fixed income and equities in an environment of rising interest rates, Kostin said. Of all Goldman Sachs Group's investment theme baskets, betting on duration is the best long-short trade, with a 25 per cent return since the beginning of 2021.

Duration is widely used in bond analysis, but for stocks, duration is positively related to PE and PB. In general, the value stocks with lower PE are short-term, and the growth stocks with higher PE are long-term.

As the chart below shows, duration is Alpha's main contributor so far this year, with the short-term equity portfolio up 24% year-to-date, while the long-term portfolio has a return of-1%.

Goldman Sachs Group believes that this trend will continue:

Keeping interest rates near zero until at least 2024, according to the Fed, coupled with rising real interest rates and break-even inflation, means the yield curve will be steeper.

Meanwhile, in expectations of a historically overheated economy, Goldman Sachs Group predicted that US GDP growth would peak at 10.5 per cent in the current quarter and nominal interest rates could rise by another 15 basis points to 1.8 per cent. Therefore, short-term stocks should continue to outperform the market, which means that technology stocks will weaken further.

Some clients believe that treasury yields peaked at 1.75% at the end of march, and long-term growth technology stocks will now outperform the market again, Kostin said in the report. Kostin gave these clients a financial motto: "Don't fight the Fed":

If the central bank wants inflation, it will happen sooner or later. A year ago, the Fed intervened forcefully to support money markets, sending a clear signal to companies and fund managers that it was willing to provide liquidity. The fed set a bottom below the stock market, triggering an 80 per cent rally and pushing the s & p 500 to an all-time high.

The Kostin stressed that the Fed wanted inflation to rise, rejecting pre-emptive tightening and, under average inflation targeting, hoping that core personal consumption expenditure average inflation would reach 2 per cent over time.

Although inflation is likely to rise in the coming months, peaking at 2.3 per cent in April, this is likely to be temporary and will remain below 2.0 per cent until 2023, according to Goldman Sachs Group's economic team.

The latest statement of Powell of the Federal Reserve also confirms Goldman Sachs Group's view.

In an interview with CBS's "60 minutes" program, Powell expressed an optimistic view of the US economy, saying that the economy is at an inflection point and job growth will accelerate.

Even so, when asked when the Fed would start putting on the brakes on the economy, Mr Powell replied that we would not consider raising interest rates until the labour market had largely recovered, full employment was achieved, and inflation returned to 2 per cent and was expected to rise above 2 per cent within a period of time.