The spike in 10-year Treasury yields has caused the market to suffer, and US stocks are facing further downside risks.

It is noticed that as the yield on 10-year US Treasury bonds approaches the levels that have caused the stock market to suffer in recent years, there is still room for further decline in the US stock market. The yield on the 10-year US Treasury bonds has climbed to just below 4.7%, rising by almost one percentage point continuously since mid-September to the highest level since April. This trend is similar to what happened in 2022 and 2023 when global stock markets saw a significant drop. However, this time, the stock market has only slightly recovered, and if the yield continues to rise, there is still room for the stock market to fall. Goldman Sachs strategist Christian Mueller-Grisman wrote in a report, "The stock/bond yield correlation has once again turned negative." He emphasized that if the yield continues to rise without good economic data, it will hit the stock market. "As the stock market is relatively resilient during bond sell-offs, we believe that if negative growth news emerges, the risk of a short-term pullback will increase." The strategist pointed out that as the yield curve steepens, longer-term interest rates have seen the biggest increase, indicating market concerns about US fiscal and inflation risks. Most of the increase is coming from real yields, rather than breakeven inflation. Future monetary policy expectations may continue to fluctuate. The market has already repriced the number of interest rate cuts in the US, with expectations of only one cut in July by 25 basis points. The minutes of the FOMC meeting later on Wednesday may provide clues about the policy outlook. So far, the market seems to believe that a scenario of falling prices, economic recovery, and gradually easing policies will prevail. Most investors are very optimistic about 2025, especially for the US stock market, while ignoring the potential tariffs under the new government and the inflation pressures brought by US policies. UBS strategist Gerry Fowler said, "It all depends on real yields, not inflation. It also depends on the long term rather than the short term, which indicates that the market is currently very optimistic about improving US productivity and almost not concerned about tariff escalation."