Investors warn that lofty U.S. stock markets have not priced in the risk of rocketing inflation and are vulnerable to a sharp spike in bond yields.
Robust first-quarter earnings and AI expectations have boosted equities. But a spike in yields—the 30-year Treasury above 5% and 10-year above 4.5%—could change the picture.
Paul Karger says clients ask at “breakfast, lunch and dinner” how to make sense of the paradox: earnings are positive, but oil prices and inflation are negative.
Karger uses a “barbell” approach: overweight cash, gold, and commodities while holding mega-cap growth stocks.
Since the U.S.-Iran war, the S&P 500 is up over 17% from its March low. But rising yields pressure valuations by increasing borrowing costs.
The S&P 500 trades at 21.3 times forward earnings, above the long-term average of 16.
Peter Tuz fears inflation is “embedded” in the economy. Jack Ablin warns a Hormuz closure could create a new inflation regime.
Earnings are rosy: first-quarter profits beat expectations, up 28% year-over-year. AI spending boosts chip demand, but lofty valuations may trigger a pullback.
Fear of missing out supports markets. Tim Murray says traders avoid being bearish given hopes of a quick Hormuz resolution.
Risks are skewed: crude oil above $100, inflation fears rise. John Higgins warns equity markets are not braced for a prolonged Hormuz shutdown.
