JPMorgan: US Bond Yield Rising to 5% Could Pose Risk to Stock Market

BlockBeats News, September 2nd - Grace Peters, Global Head of Investment Strategy at JPMorgan, stated that as the global stock market faces a historically weak September, the continued rise in bond yields poses a key risk to the global stock market. Peters expects further upside potential for U.S. and European stocks this year, but she warns that as the risk of events such as the November U.S. midterm elections approaches, the market may see a 5% to 8% pullback. This would be considered a healthy correction rather than a deteriorating market structure. The rising bond yields have become a major concern for stock market investors.

The market is increasingly worried that rising oil prices will drive inflation higher, pushing the yield on 10-year U.S. Treasury bonds to 4.8%, approaching the 5% level that is usually seen as detrimental to the stock market. Meanwhile, the 30-year Treasury bond yield has risen to its highest level in 19 years. The market is speculating more and more that policymakers will be forced to raise interest rates, thereby pushing yields back to where they were before U.S. Treasury Secretary Bentsen expanded buybacks to control long-term borrowing costs.