The surge in 10-year U.S. Treasury yields is causing "pain" in the market, and U.S. stocks face further downside risks

The Zhitong Finance APP noted that as the yield on 10-year U.S. Treasuries approaches levels that have caused significant pain for the stock market in recent years, there is still room for further declines in the U.S. stock market. The yield on the 10-year U.S. Treasury has risen to just below 4.7%, having increased by more than one percentage point almost continuously since mid-September, reaching its highest level since April. This trend is similar to the situation in 2022 and 2023, when global stock markets fell sharply. However, this time, the stock market's upward momentum has only paused briefly, and if yields continue to soar, there is still room for the stock market to decline. Goldman Sachs strategist Christian Müller-Griessmann wrote in a report, "The correlation between stock and bond yields has turned negative again." He emphasized that if yields continue to rise without strong economic data, it will hurt the stock market. "Given that the stock market has been relatively resilient during the bond sell-off, we believe that the risk of a short-term pullback will increase if negative growth news emerges." Strategists pointed out that as the yield curve steepens, long-term rates are rising the most, indicating market concerns about U.S. fiscal and inflation risks. Most of the increase comes from real yields rather than breakeven inflation. Expectations for future monetary policy may also fluctuate further. The market has repriced the number of U.S. rate cuts, expecting only one cut in July, with a reduction of 25 basis points. The FOMC meeting minutes to be released later on Wednesday may provide clues about the policy outlook. So far, the market seems to believe that the "Goldilocks" scenario of falling prices, economic recovery, and gradual policy easing will prevail. Most investors are very optimistic about 2025, especially regarding the U.S. stock market, while ignoring potential tariff increases and inflation pressures from U.S. policies under the new government. UBS strategist Gerry Fowler stated, "It all depends on real yields, not inflation. It also depends on the long term rather than the short term, which indicates that the market is currently very optimistic about the improvement in U.S. productivity and is almost unconcerned about tariff escalations."