As US bond yields soar, how much longer can the US stock market party last?
Currently, there are no signs of a bear market in the US stock market, but the surging yields on US Treasury bonds may become a turning point for the situation. Bank of America Merrill Lynch states that when the 10-year US Treasury yield exceeds 5%, investors tend to shift from the stock market to the bond market, limiting the rise of US stocks. This yield has climbed by 80 basis points since mid-September, although the bank indicates that the current interest rate risk is manageable.
The second largest net inflow of capital since 2008! Investors go all in on US stocks
According to EPFR data, in the week up to last Wednesday, US stock etf and mutual funds attracted nearly 56 billion dollars in inflow, marking the second largest weekly inflow record since 2008. These funds have attracted inflow for seven consecutive months, marking the longest duration since 2021.
Investors are betting on a rise in US stocks! Analysts warn: the market is dangerously optimistic.
The animal spirits of U.S. stock investors are exceptionally active, but analysts indicate that the "market has become very expensive."
China International Capital Corporation: Trump 2.0 accelerates economic recovery, with ckh holdings and small cap styles favored.
The recovery of the fundamentals will continue to drive the cyclical sectors such as discretionary consumer goods, capital goods, and raw materials, and before the implementation of Trump's tariffs, it will be bullish for the relevant domestic export sectors (seizing exports).
A new round of trade war dubbed "Trump 2.0" may trigger global economic turmoil! However, Wall Street firmly believes that U.S. stocks will never decline.
Trump's "scorecard" is the s&p 500 index, which is the biggest hope for bullish strength in Wall Street; Strategists generally say that the next USA president will not at least harm the market with economic plans.
Wall Street investment banks consensus: The Federal Reserve will slow down interest rate cuts in 2025.
Several institutions have already started to reduce their bets on the prospect of Fed rate cuts.