May 22, 2026

Focus on the Bond Market

Last week, we wrote about the unusual narrowness of the stock market. The point was not to call the rally “wrong.” Rather, it was to point out that when leadership narrows, risk changes.

This week, the focus shifts to whether corporate earnings can keep supporting stocks as bond yields rise. So far, earnings have been strong with ~95% of the S&P 500 reported.  Companies are reporting the best growth since 2021. The Magnificent 7 continue to deliver exceptional results, but the strength was broader; the other 493 S&P 500 companies reported 17.4% Q1 earnings growth.

Bond Yields Move Higher

A prolonged and unresolved conflict threatens to push costs higher across the global economy, particularly through energy, while also weighing on growth. That is an uncomfortable mix for markets. Bond volatility is rarely friendly to equities, and we are seeing that tension now.

At the end of February, the 10-year Treasury yield was below 4.00%, and the market was still pricing in two rate cuts this year. . . .

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