When will rising yields crash stocks?

If you ask Goldman Sachs then rising yields will never hurt equities. If you ask BofA then it is soon. If you ask me then it’s neither as inflation peters out first. The excellent Matt King at Citi now adds his two-bob’s worth:

Consensus explains the yield backup in terms of rising nominal growth and rate expectations. The implications are benign: stabilization once “too many” hikes are priced in; improving fundamentals supporting risk assets; a still accommodative level of financial conditions. All this would make sense if markets were largely value-driven.

 But investors have not piled into each and every asset class on the basis of cheapness. Analysts’ better judgement has been subjugated by relentless inflows; expensive valuations have been explained away in terms of diminishing risk premia.

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