The rising 10-year Treasury yield (^TNX) reaches a 14-month high at 4.79%, pressuring stocks and creating competition for equity investments.
Jeremy Schwartz, WisdomTree global chief investment officer, joins Asking for a Trend to discuss how the psychological aspect of 5% on yields impacts stock valuations. Additionally, with inflated earnings growth expectations (16 to 17% for 2025), the market faces risks.
Schwartz discusses the possibility of the 10-year yield moving even higher. "We've been saying for a little while that we could get from 5 to 5 and a half. You know the upper end of that range would be the Fed's not cutting, and the normal premium of the 10-year over the Fed funds is about 125 basis points," he explains. "So that would get you right around that 5 and a half level. If the Fed is not cutting, you know, 5 and a quarter is more likely."
Looking ahead, he notes, "Analysts are currently expecting around 16 to 17% earnings growth. In the last two years when we've had a very good, healthy market, you didn't even get 10%; it was 8 to 9% earnings growth for each of the last two years."
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Schwartz also says he favors value stocks, recommending the WTV fund, which offers a lower price-to-earnings ratio, strong buybacks, and an 8% earnings yield.
To watch more expert insights and analysis on the latest market action, check out more Asking for a Trend here.
This post was written by Josh Lynch