Bond yields are spiking, oil is up — but investors aren’t giving up on stocks — SkimNews
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- The U.S. 10-year Treasury yield breached the 5% level on Tuesday, extending a global government bond sell-off, while oil held above $100 per barrel as the Iran war's supply shock persisted.
- The S&P 500 has gained 10.8% year-to-date despite rising yields and oil, with the Nasdaq up 11.8% and the Dow up 8.4%; stocks in South Korea, Japan, and Europe also rallied.
- Bank of America's Global Fund Manager Survey, which polled 170 investors overseeing $470 billion, found a net 49% remained overweight global equities in September, with bond allocation at its lowest since May 2022 and double-digit EPS growth expectations at their highest since August 2021.
- BlackRock Investment Institute strategists maintained a pro-risk stance with U.S. equity and AI overweights, arguing that higher yields driven by stronger investment and growth can coexist with strong equities because resulting earnings strength offsets a higher cost of capital.
- Federated Hermes analyst Tej Sthankiya said the AI data center buildout remains capacity-constrained by access to semiconductor wafers and power, with no signs of these bottlenecks abating in the near term.
- UBS Global Wealth Management's Mark Haefele said stronger AI safeguards do not establish that the AI capex cycle is ending, recommending diversified exposure across semiconductors, networking, power, cloud, platforms, and software.
Why it matters: Fund managers cut bond allocations to the lowest level since May 2022 while keeping equities overweight — a 170-investor snapshot showing a clear rotation from fixed income into stocks on the bet that AI-driven earnings growth can absorb a 5% Treasury yield, leaving portfolios unusually dependent on continued AI capex paying off.
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