BlockBeats report, on May 19, as U.S. Treasury yields continued to rise, several major Wall Street asset management firms began warning that the divergence between the U.S. stock and bond markets is intensifying, raising the risk of a market correction.
Reports indicate that since April, AI and technology stocks have pushed the S&P 500 to new highs, while U.S. Treasury bonds have faced sustained selling pressure, pushing the 10-year Treasury yield to its highest level in over a year. Markets are concerned that conflicts in the Middle East and elevated oil prices could reignite inflation and force the Federal Reserve to maintain high interest rates.
Vincent Mortier, Chief Investment Officer of Amundi, said, "A correction in U.S. stocks is only a matter of time, not if it will happen." He noted that market sentiment, narratives, and positioning have undergone a "complete reversal" in just six weeks.
Data shows that since the ceasefire news emerged, the S&P 500 has risen by 12% cumulatively, but the one-year inflation swap rate has surpassed 4% for the first time since 2025, indicating that bond markets are repricing inflation risk.
Raphaël Thuin, Head of Strategy at Tikehau Capital, said there is an “irreconcilable contradiction” between the current environment—where stock markets are hitting new highs, credit spreads are narrowing, and market sentiment is extremely bullish—and the energy and interest rate markets, which are pricing in long-term economic shocks.
However, some institutions believe corporate earnings continue to support U.S. stocks. Giles Parkinson, Head of Equities at Trinity Bridge, stated that current corporate earnings are “exploding,” and the rationale for market gains is far from over. One asset management executive summarized that the bond market has issued a “yellow alert” over high oil prices and persistent inflation, while the stock market has chosen to continue betting on optimistic expectations: “The market will keep celebrating until real disaster strikes.”