Strong earnings help stocks defy surge in bond yields
SPY•SPY•SPY•SPY•Global equities have climbed roughly 13% this year even as the 10-year Treasury yield rose about 100 basis points. Morgan Stanley strategists expect median S&P 500 earnings per share to grow in the mid-teens, helping offset higher yields.
Robust corporate earnings and rising growth expectations have helped investors look past higher borrowing costs, Morgan Stanley analyst Andrew Sheets said. Morgan Stanley’s US equity strategists expect median S&P 500 earnings per share to grow in the mid-teens, with analyst revisions near cycle highs.
The equity risk premium—the gap between the S&P 500 earnings yield and Treasury yields—has stayed broadly stable despite higher government borrowing costs. ETF flows have remained positive for both stocks and bonds, while Morgan Stanley cautions that higher yields leave less room for disappointment.
