Treasury yields may still be uncomfortably high, but the bond market is not yet in the “danger zone” for stocks, Laffer Tengler Investments CEO Nancy Tengler told Yahoo Finance on Friday.
Stocks rose on Friday as the 10-year yield (^TNX) dipped to 4.5% and the 30-year yield (^TYX) edged 3 basis points lower to 5.09%. The 30-year yield is still above the 5% psychological level that affects how investors view stocks, bonds, and Washington’s borrowing costs, but the stock market is shrugging off some of those concerns.
The Dow is at record highs, above 50,500, and the S&P 500 and Nasdaq are a stone’s throw from their records.
“If we stay in a range around 5% — or certainly below is better — you will see investors return to stocks,” Tengler told Yahoo Finance’s Julie Hyman. “It’s time to watch and wait and not necessarily act.”
“I just don’t think the bond market is going to be the thing that derails the stock market,” she added.
Two things that could derail the bull market, however, would be a deceleration in earnings growth and a collapse in historically high operating margins, according to Tengler.
Strategists continue to point to strong double-digit earnings growth in the first quarter as the factor propping up stocks. S&P 500 companies are pacing for a 28.4% blended growth rate, according to FactSet.
