The case for stocks surviving rising Treasury yields has rested on strong earnings growth, which has so far cushioned the pressure that climbing bond rates put on equity valuations. The market has held. The risk is that it held because earnings growth was up to the task, not because yields found a ceiling.
Think about what that arithmetic requires. Rising yields compress the present value of future cash flows. Earnings growth can offset that compression, but only while it keeps pace. The case for continued resilience depends on earnings staying strong enough to carry the weight of ever-higher rates. That is a dynamic that can sustain for a time and then break sharply.
The counterargument is that earnings have already absorbed a meaningful rate increase without visible cracks in equity prices, and that resilience itself is a signal. If the economy can generate earnings growth in a higher-rate environment, the old discount rate playbook may need updating. The market clearing at these levels is a form of evidence.
On balance, that counterargument has limits. Stocks have survived rising yields so far, but the qualifier matters. "So far" is not an all-clear. The read-through, if bond rates keep climbing, is that the cushion provided by earnings growth gets thinner. The line to watch is whether rates press high enough to make the earnings offset arithmetic impossible to close. When they do, the calculation changes.