Fundstrat strategist Tom Lee suggests that a 10-year Treasury yield of 5% remains manageable for the stock market, provided corporate earnings growth stays robust. He notes that third-quarter earnings are currently tracking near 29% growth, with positive projections for S&P 500 earnings in 2027.
However, Lee warns that a rise to 6% would create significant competition for equities, as government bonds would offer higher, near-guaranteed returns. The 10-year Treasury yield crossed the 5% mark on September 15, 2026, and reached approximately 5.3% by early October 2026.
Economist Ed Yardeni also monitors the 6% threshold, cautioning that a rapid spike to this level could reveal vulnerabilities in the financial system by catching leveraged participants off guard. The current yield environment follows the Federal Reserve's first rate hike since 2023, which established a target range of 3.75%–4.00%.
Lee anticipates that yields could return below 5% within six months if inflationary pressures subside. He suggests that higher yields may favor well-capitalized companies with strong balance sheets, while firms reliant on cheap financing may face increased pressure on their valuations.
