Yardeni Research says the recent surge in U.S. Treasury yields should not be interpreted as a systemic threat to the equity market, instead attributing the move to economic strength and short-term inflation pressures.
The firm noted that the 30-year Treasury yield reached 5.19%, its highest reading since July 2007, while the 10-year yield climbed to 4.69%, the loftiest level seen since January 2025. Yardeni linked these shifts to last weeks hotter-than-expected April producer price index reading and to a sequence of stronger-than-expected macroeconomic indicators.
Despite the rapid ascent in yields, Yardeni rejected recession concerns. The firm described the situation as "a resilient economy with a short-term inflation problem" rather than a slide into stagflation. Based on its assessment, Yardeni expects the Federal Reserve to respond with a rise in the federal funds rate within the next two months.
Yardenis current assessment is that the bull market is not in danger of being derailed by the bond markets sell-off. The firm views the move as providing "a very good opportunity to buy both bonds and stocks." It cited several data points in support of that outlook: a Redbook same-store retail sales index reading of 8.9% year-on-year for the week ending May 16; private payroll gains averaging 42,250 jobs per week through early May; and a Citigroup Economic Surprise Index that has remained robust.
Maintaining its year-end outlook for equities, Yardeni kept an S&P 500 target of 8,250. The firm added a clear condition for changing its stance: it would begin to worry if the 10-year Treasury yield significantly breaches 5.00%.
Yardenis analysis frames the higher yields as a response to stronger inflation and economic prints rather than as an indicator of severe economic deterioration. That distinction underpins its recommendation to view current market conditions as an entry point for investors seeking exposure to both fixed income and equity markets.
While the swift movement in yields has unsettled some market participants, Yardenis note emphasizes monitoring interest-rate levels closely, particularly the 10-year yield, as the key variable that could prompt a reassessment of its bullish equity posture.