Rising yields remain the bigger story

Nasdaq modestly green, S&P 500 ~flat, Dow dips.

Staples leads S&P 500 sector gainers; financials are the weakest group.

Euro STOXX 600 index up ~0.3%.

Dollar gains; gold, US crude, bitcoin all dip.

US 10-year Treasury yield steady at ~4.96%.

Bond investors have had little to cheer about in recent months. Even as major central banks, including the Federal Reserve, have raised rates and maintained a hawkish tone on inflation, bond yields have continued to climb.

In his latest Deliberations note, Bob Doll, chief investment officer at Crossmark Global Investments, argues that higher policy rates and tough inflation rhetoric have done little to calm bond markets. Instead, he points to firming global growth, accommodative financial conditions, persistent inflation, widening budget deficits and heavy AI-related corporate borrowing as the main drivers behind higher yields.

Doll also contends that political efforts to cap Treasury yields have largely backfired.

While yields have risen sharply since May, Doll notes the move has remained orderly, with higher oil prices adding further upward pressure. The bigger risk, he argues, is that the gradual rise eventually turns disorderly, posing a greater threat to the global expansion.

He also believes inflation may prove harder to tame than many expect. In Doll's view, a return to low and stable inflation may not occur until economic growth slows more meaningfully and excess demand fades.

For now, however, he continues to favor stocks over bonds. Doll cites a healthy earnings outlook, resilient growth and lingering inflation pressures that continue to support corporate pricing power. He also notes that the stock-versus-bond return trade remains favorable, although recent gains have stemmed more from bond losses than stock market strength.