Bond yield spike threatens equity valuations as investors reassess market risks. The 30-year Treasury bond has surged above 5% while 10-year yields climbed above 4.5%, prompting significant stock market caution on Friday. Despite robust first-quarter earnings and AI-driven optimism, analysts warn that US equities have not adequately priced in inflation risks and geopolitical tensions. Higher bond yields increase borrowing costs for companies and consumers, potentially dampening economic growth and corporate profitability. This creates a market paradox where strong earnings clash with negative inflation signals. Asset managers are adopting defensive strategies, including overweight positions in cash and commodities while maintaining exposure to mega-cap growth stocks.
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