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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 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.
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