Societe Generale: 10-Year U.S. Treasury Yield at 5.5% Is a Tipping Point; Breaking Above It Will Pressure Stock Valuations

Odaily Planet Daily News According to Alain Bokobza, head of global asset allocation at Societe Generale, a 10-year U.S. Treasury yield of 5.5% is a critical threshold, beyond which higher borrowing costs will outpace earnings growth and begin to pressure stock valuations. Bokobza noted that global earnings expectations have been significantly revised upward this year, which has prevented the equity risk premium from collapsing even as yields rise. He stated, "Stocks are currently not more expensive than at the start of the year, but a yield level of 5.5% will be the tipping point where earnings upgrades are no longer sufficient to support valuations—that is, the threshold at which stocks begin to take a hit."

He also expects the upcoming rate hikes by the Federal Reserve and the European Central Bank to be moderate, unlikely to be aggressive enough to break the current economic cycle or quell inflation concerns. Last week, Grace Peters of JPMorgan said that a 10-year Treasury yield reaching 5% would carry significant psychological weight and could trigger a stress reaction in the stock market. Emmanuel Cau of Barclays similarly believes that a rise to 5% will heighten investor concerns about the stock market's impact. (Jin Shi)