U.S. Treasury yields reach 20-year high, S&P 500 remains resilient amid AI-driven growth

Huo Xing Finance reports that on September 27, despite the U.S. 10-year Treasury yield rising to its highest level in nearly 20 years, U.S. equities remained resilient, with the S&P 500 showing no significant impact. This divergence has prompted investors to reevaluate the historical relationship between surging bond yields and stock market performance. Historical data shows that rising yields do not necessarily lead to stock market declines. In 1994, Federal Reserve rate hikes triggered a bond market sell-off, causing the S&P 500 to drop by approximately 8% before gradually recovering as economic and corporate earnings resilience persisted. In 2016, rising yields were viewed as a sign of economic recovery and policy normalization, with U.S. stocks and Treasury yields moving higher in tandem. By contrast, in 2022, aggressive Fed rate hikes pressured both bond and stock markets, resulting in a sharp decline in the S&P 500. In 2026, U.S. equities again face a scenario of rising yields alongside economic resilience. Major tech companies are heavily investing in AI infrastructure, providing support for both the economy and the stock market, while a potential agreement between the U.S. and Iran that lowers oil prices could also ease inflationary pressures. However, bearish views suggest the Fed may need to continue raising rates until stock markets and broader financial conditions show sufficient restraint. Bank of America interest rate strategist Meghan Swiber noted that current equity and other risk asset performance remains strong, without sending clear signals that demand is slowing.