The Bull Market Turns 4, but Rising Yields Pose a Real Threat

Four years into one of the more resilient bull markets in recent memory, the story has remained remarkably consistent: when in doubt, buy technology. Mega-cap tech names have served as the load-bearing wall of equity gains since the market bottomed in late 2022, and for most of that stretch, skeptics who bet against the rally paid dearly for their conviction.

Yet anniversaries have a way of forcing uncomfortable questions, and the one now confronting investors is whether the conditions that sustained this run are quietly eroding. Bond yields have crept back toward levels that historically create serious competition for equities — offering investors a risk-free alternative that, at sufficiently elevated rates, makes the relative appeal of stocks harder to defend on a pure valuation basis.

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The tension is straightforward in theory but tricky in practice. Higher yields raise the discount rate applied to future corporate earnings, which compresses the price investors are rationally willing to pay for growth stocks today. Tech, with its long-duration earnings profile, is particularly exposed to that dynamic — meaning the sector that built the bull market could also be the one most vulnerable if rates stay elevated or push higher still.

What makes this moment analytically interesting is that the bull market has survived yield scares before. Each time, either the Federal Reserve pivoted, economic data softened enough to pull rates back down, or corporate earnings proved resilient enough to override the math. Whether that pattern holds for a fifth year depends heavily on the inflation trajectory and how long the Fed feels compelled to keep policy restrictive.

For now, the birthday cake has candles — but the yield curve is blowing hard in the wrong direction. Continue reading at MarketWatch.com