Lates News

Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America, said that for the first time in decades, bonds have truly become a competitive alternative asset to the stock market. She also warned that investor sentiment is currently at elevated levels, which means the stock market is more vulnerable to negative surprises, while the room for further upside beyond expectations is relatively limited. Subramanian said the yield on the U.S. 10-year Treasury has now exceeded 5%, while Bank of America's own valuation model suggests the S&P 500's annualized return over the next 10 years may fall short of that level. Subramanian noted that U.S. policymakers are working to prevent long-term interest rates from rising too high. Both the Federal Reserve and the U.S. Treasury Secretary are closely monitoring changes at the long end of the yield curve. At the same time, demographic shifts also mean that the ceiling for U.S. interest rates may be lower than in the 1970s and 1980s. In addition, artificial intelligence may bring certain deflationary effects in the future, thereby easing long-term inflation and interest rate pressures. Against this backdrop, Subramanian believes the environment for bond allocation is becoming more favorable, because U.S. Treasury yields may find it difficult to sustainably rise above 6% to 7%.