Forecast Trend Report by Period
Global investors are betting aggressively on technology and artificial intelligence shares, but a rise in long-term Treasury yields is amplifying warnings that the stock rally could falter.
Bloomberg reported on May 16 that interviews with 32 asset managers across the US, Europe and Asia found broadly upbeat sentiment toward markets overall, alongside clear concern about higher interest rates.
About 80% of respondents said stocks would outperform other asset classes, including bonds and commodities, over the next three to six months. Roughly half identified big technology companies and AI-related shares as their preferred investments after helping drive the S&P 500 to record highs over the past seven weeks.
Most of the investors interviewed, however, viewed a sustained rise in the US 30-year Treasury yield above 5% as a danger zone for equities. The 30-year yield is already trading at that level.
"Long-term rates above 5% are very dangerous for the stock market," said Alexandre Drabowicz, chief investment officer at Indosuez Wealth Management.
Markets are worried that a prolonged closure of the Strait of Hormuz could push up oil prices, stoke inflation and ultimately drive rates even higher. Selling spread through global bond markets on May 16, lifting long-term US Treasury yields to around their 2023 highs.
Concerns about overheating are also building. More than half of the S&P 500's gains this year have come from just four stocks, underscoring how narrowly concentrated the rally has become. The Philadelphia Semiconductor Index, or SOX, is trading at a forward price-to-earnings ratio above 25, well above its 10-year average of 19.
Park Shin-young, New York correspondent, Hankyung.com nyusos@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
