Hi ,
A few developments in the US market are worth paying attention to.
The US 10-year Treasury yield recently moved above 5%, its highest level since 2007, after stronger-than-expected economic data increased expectations that the Federal Reserve may need to keep rates higher for longer or potentially raise them further.
US Treasury yields have risen sharply, increasing pressure on equity valuations.
Normally, higher bond yields create pressure on equities because investors can earn more from bonds, while companies face a higher cost of financing.
Yet US equities have remained surprisingly resilient.
One reason is that corporate fundamentals are still stronger than many expect. According to the FT piece, US earnings even outside technology and AI are still around 50% above the pre-Covid trend.
Earnings strength has not been confined only to AI or big tech
In addition, many large U.S. companies locked in debt at lower rates in prior years. The FT notes that almost two-thirds of S&P 500 company bonds and loans do not mature until after 2030, while only about 10% of debt is on floating rates. That means the impact of higher interest rates takes time to feed through to corporate profits.
Higher interest rates have not yet translated into a major interest burden for many large US companies
That said, there are also signs that the market is becoming more fragile beneath the surface.
The S&P 500 recently came close to a record high, yet 52% of its constituent stocks were below their 200-day moving average.
MarketWatch noted that the last time breadth was this weak while the index was so close to its high was around the dot-com peak in 2000.
A small group of stocks has been doing most of the heavy lifting in the index
This does not automatically mean a major correction is imminent. But it does suggest that the headline index may look healthier than the average stock underneath it.
Oil is another factor worth watching. A March Reuters report noted that while earnings expectations had held up despite higher oil prices, JPMorgan estimated that if oil stayed around US$110 per barrel for the rest of 2026, consensus earnings estimates could be revised lower by around 2% to 5%.
So the picture today is a mixed one:
Fundamentals remain resilient
Higher yields are tightening financial conditions
Market gains are increasingly concentrated
Oil and inflation remain possible risks
What this means for investors
I do not think this is a time for panic or dramatic all-in/all-out decisions.
But it is a reminder that portfolios should not be overly dependent on one market, one sector, or one investment theme.
What I am watching closely now includes:
US Treasury yields and Fed expectations
Market breadth and concentration
Corporate earnings revisions
Credit-market conditions
Oil and inflation trends
The goal is to make sure portfolios are structured so that one sudden change in market conditions does not derail long-term retirement plans.
As always, if there are meaningful developments that warrant portfolio changes, I will keep you updated.
Warm regards,
Zest
Executive Wealth Consultant | Associate Estate Planning Practitioner |
Licensed General Insurance Advisory
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