Bond Yields Surge: Why Stocks Won’t Crash
Wednesday, 19 August 2026 – The recent spike in Treasury yields has rattled equity investors, but Fundstrat’s Mark Newton argues the selloff in bonds does not signal a deeper stock downturn. In a note published this week, Newton pointed to technical evidence suggesting the S&P 500 can withstand higher yields without entering a bear market.
Newton’s Technical Case For Equity Resilience
Newton highlighted that the S&P 500’s uptrend remains intact, with key support levels holding despite the yield surge. He noted that the 10-year Treasury yield’s move above 4.5% has historically been a headwind for equities, but the current market structure shows breadth and momentum still favoring stocks. “The technical damage is limited to rate-sensitive sectors, not the broad index,” he wrote.
Specifically, Newton pointed to the S&P 500’s 50-day moving average, which remains above its 200-day average, a classic bullish signal. He also cited the percentage of stocks trading above their 50-day averages, which remains above 60%, indicating broad participation in the rally. This contrasts with previous selloffs, where that figure dropped below 40% before a deeper correction.
Why Rising Yields Aren’t Breaking The Bull Case
The key mechanism, according to Newton, is that the yield spike is driven by stronger economic growth, not inflation fears. Recent data, including retail sales and industrial production, have beaten expectations, supporting the view that the Fed can hold rates steady without choking growth. This “good news is good news” environment allows equities to look through higher discount rates.
Historically, when the 10-year yield rises alongside the S&P 500, it signals a risk-on regime. Newton cited the 1994 bond selloff as a precedent: equities corrected but then rallied to new highs. He argues that today’s backdrop—with earnings growth expected at 10% for 2026—provides a cushion against multiple compression.
Rate-Sensitive Sectors Face The Brunt
Not all stocks are immune. Newton flagged that utilities and real estate investment trusts (REITs) have underperformed, with the S&P 500 Utilities Index down 8% since yields broke above 4.5% in early August. In contrast, technology and financials have absorbed the shock, with the Financial Select Sector SPDR Fund (XLF) up 3% over the same period.
Investors should watch the 10-year yield’s next key level at 4.75%. If it breaks above that, Newton says the equity selloff could deepen, but he sees that as a low-probability event given the Fed’s easing bias. The Fed’s Jackson Hole symposium, scheduled for August 21-23, will be the next catalyst, with Chair Powell likely to reiterate a patient stance.
What To Watch: Jackson Hole And The 4.75% Ceiling
The immediate test for Newton’s thesis is the upcoming Jackson Hole meeting. If Powell signals a rate cut in September, it could cap yields and reinforce the equity rally. Conversely, a hawkish surprise would push yields higher, testing the S&P 500’s 5,400 support level.
For now, Newton advises staying invested but rotating into sectors that benefit from higher rates, such as financials and energy. He cautions against chasing defensive stocks, which have already priced in a recession that may not materialize.
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