Bond Yields On The Spectrum: From Good To Ugly (with special guest Nick Raich)

Rising bond yields reflect a resilient economy and higher neutral interest rates rather than an immediate debt crisis. While stock prices continue to climb, a negative divergence—termed an "alligator jaw"—is emerging as earnings revision momentum cools. This pattern, reminiscent of 2021, suggests that while current market conditions remain positive through year-end, a potential storm is brewing for 2027. Earnings growth is expected to decelerate, and the Federal Reserve’s shift toward rate hikes is compressing market multiples. Investors should monitor the delta on earnings estimates closely, as weakening revision trends alongside rising prices historically precede major market corrections. Maintaining a disciplined approach to de-risking is essential, particularly regarding high-beta sectors like technology, should this divergence persist into the next earnings season.