--- title: "Rates are at multiyear highs, yet stocks hit fresh records. Here's how long the defiance may last." type: "News" locale: "en" url: "https://longbridge.com/en/news/295922631.md" description: "LPL Financial strategist Jeff Buchbinder notes that while stocks hit records despite multiyear high bond yields, the negative correlation suggests vulnerability. Yields above 4.3% typically pressure equities due to inflation and debt supply fears. However, Buchbinder expects yields to fall as Middle East negotiations ease energy costs, likely supporting modest equity gains in H2 2026. Sectors like materials and real estate may suffer if yields rise, while energy could outperform." datetime: "2026-08-14T10:49:26.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/295922631.md) - [en](https://longbridge.com/en/news/295922631.md) - [zh-HK](https://longbridge.com/zh-HK/news/295922631.md) --- # Rates are at multiyear highs, yet stocks hit fresh records. Here's how long the defiance may last. By Jamie Chisholm The relationship between bond yields and equities has turned negative again, says LPL Financial Storm clouds are brewing over U.S. government bonds Bond yields are rising amid a flood of government and corporate supply, and alongside sticky inflation. The U.S. just sold 30-year debt at its highest borrowing cost since 2001. Stock markets seemingly care not a jot. As the Treasury long bond yield BX:TMUBMUSD30Y traded near a multiyear peak, the S&P 500 SPX on Thursday registered its 27th record closing high of 2026. Even the usually more interest rate-sensitive Russell 2000 index RUT of small caps hit a record. However, LPL Financial chief equity strategist Jeff Buchbinder implies that higher bond yields actually may have been constraining the stock market's ebullience of late, and that a likely pullback in yields should provide additional propulsion for equities. In commentary published Thursday, Buchbinder explains that the stock market's relationship with bonds is fluid. Equities can happily rise alongside climbing bond yields (meaning falling bond prices) if the reason for the increase in rates is faster economic growth that most likely will boost corporate profits. But if bond yields are rising primarily because of fears about increased debt supply or burgeoning inflation, then those elevated rates, particularly if the rate of ascent is quick, can reach a threshold that spills into equity market selling pressure, according to Buchbinder. "The 10-year \[Treasury\] yield has remained uncomfortably high as sporadic flare-ups in kinetic activity and unanswered questions around energy production and shipping disruptions in the Middle East have led markets to increase their expectations of a Federal Reserve rate hike," he says. Such a dynamic has led stocks and rates to move in opposite directions in the past, and it's come back into play at times again this year. As the chart below shows, when the 10-year Treasury yield BX:TMUBMUSD10Y rises in a sustained move above the 4.3% range, the three-month weekly correlation with the S&P 500 flips negative, suggesting that stocks have struggled above this level, Buchbinder contends. Source: LPL Financial "When the 10-year yield has entered this range, market concerns of higher rates potentially hurting the economy and the equity market via higher borrowing costs impairing demand for big-ticket purchases, weighing on stock valuations, and increasing the cost of capital (especially for the more debt-laden small cap space) begin to dampen risk appetite until upward pressure on yields ebbs," he says. So, the important question for investors is whether yields will continue to rise apace, risking a negative reaction from equities. On that, Buchbinder is optimistic that a key cause of rising rates, higher energy costs, will be ameliorated in coming months. "Negotiations in the Middle East are ongoing, and all parties still seem interested in eventually reaching a diplomatic resolution," he says. "While global economic impacts may change depending on how long that takes, once a deal is reached crude prices and Treasury yields are likely to come off recent highs, and we continue to expect the 10-year yield to finish the year between 4.00% and 4.50%." And as stocks' correlation with rates is currently negative, Buchbinder says "we would expect stocks to feel some support if upward pressure on Treasury yields eases - aligning with our expectations for modest equity market gains over the second half." Source: LPL Financial In terms of how different sectors will react to bond moves, he notes that higher yields could weigh more on materials, real estate, and developed-market stocks, as they have been the most negatively correlated assets to 10-year Treasury yields over the last year. The opposite is true if bond yields fall, of course. "On the other side of the coin, and to little surprise, energy companies and crude oil futures could be relative outperformers in the event of a breakout higher in yields, as they have displayed the highest correlation to yields," says Buchbinder. The markets U.S. stock-index futures (ES00) (YM00) (NQ00) are mixed as Treasury yields BX:TMUBMUSD10Y rise. The dollar index DXY is lower, as oil futures (CL.1) climb and gold futures (GC00) trade around $4,402 an ounce. Take control of your news. Make MarketWatch your preferred source on Google. The buzz Shares of Workday (WDAY) are surging after Reuters reported that private equity group Silver Lake is in talks to acquire the business software group. Applied Materials shares (AMAT) are falling after earnings for the chip equipment maker were deemed not quite good enough for a stock up 108% in 2026. Reddit stock (RDDT) is jumping after news the social-media platform would enter the S&P 500 next week. U.S. economic data due Friday include retail sales for July, published at 8:30 a.m. Eastern. The University of Michigan preliminary consumer survey for August will be released at 10 p.m. How Trump and Musk rekindled a relationship that seemed beyond repair. The chart Stonking earnings have been supporting the stock market. But Jim Paulsen, Wall Street veteran and writer of the Paulsen Perspectives blog, worries that the profit boom is too narrow. "The number of S&P 500 firms with higher trailing 4-week average 12-month forward earnings per share estimates is only about 122 compared to peak levels during early 2018 of almost 150 and during 2020 of almost 163," he says. Top tickers Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern. Nero's bridge emerges from Tiber amid Rome drought. \-Jamie Chisholm This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. 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