Aug. 27 at 8:10 PM
HSBC said Thursday that rising bond yields remain a risk for equities, but have not yet become a significant drag. The bank believes the 10-year U.S. Treasury yield would need to move sustainably above 5%, or volatility would need to increase sharply, before higher rates become a major threat to stocks.
HSBC’s base case remains that the Federal Reserve will keep interest rates unchanged through this year and next. The bank also sees a K-shaped consumer outlook, with higher-income households supported by strong equity wealth, while lower-income consumers are more exposed to variable-rate debt such as credit cards and auto loans.
Corporate balance sheets remain resilient, with S&P 500 net debt/EBITDA at 1.6x, only 11.2% of debt maturing in the short term and credit spreads still historically low. HSBC said strong corporate earnings, particularly in technology, have weakened the usual negative impact of higher yields on valuation multiples.
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