Stock investors may be underestimating the pressure on the bond market if the Federal Reserve becomes more aggressive. The yield on the 2-year U.S. Treasury jumped 18 basis points to more than 4.73% on Tuesday and reached 4.87% on Thursday, while the 10-year yield rose above 5.11%. Hotter-than-expected October inflation strengthened expectations of a 0.25 percentage-point rate hike in December, with futures now pricing in three quarter-point increases by March 2027. Wolfe Research estimates that the start of a rate-hiking cycle has historically led to an average 0.6% decline in stocks over the following three months. Goldman Sachs expects a 0.25-point hike in March, while Standard Chartered forecasts the 10-year Treasury yield could reach 5.50% by mid-2027.
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