Stocks Rally on AI, Bonds Yield 5%+ Amid 'Bliss Trade'
SkimNews Take
The "bliss trade" in stocks reflects an assumption that policymakers will intervene to prevent significant economic downturns, even as bond markets price in higher risk.
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- Gita Gopinath described the "bliss trade" as a belief that stocks can keep rallying even as bond investors price in higher inflation risk.
- S&P 500 is on track for a seventh straight week of gains, pushing the index toward all‑time highs.
- Cerebras Systems shares jumped 68% after investors pounced on the new AI stock.
- 30‑year Treasury yield crossed 5% for the first time since 2007 following an auction with middling demand.
- 10‑year Treasury yield climbed to 4.54% on Friday morning.
- Seema Shah of Principal Asset Management noted the equity market is completely ignoring inflation, a risk that could change as the war continues.
- Karen Manna of Federated Hermes said investment‑grade corporate bonds are seeing strong demand, offering investors a comfort relative to U.S. government debt.
Why it matters: Investors in equities benefit from the 'bliss trade' optimism, riding AI‑driven earnings and fiscal‑spending expectations, while bondholders confront higher Treasury yields—5% on 30‑year notes for the first time since 2007—inflation risk that erodes real returns and raises borrowing costs for the U.S. government.
