Rising Rates Cloud Outlook for Stocks as Bonds Become More Attractive

Soaring Treasury yields make bonds more attractive relative to stocks, fueling equity selloffs and threatening long-term stock performance.

Higher yields raise companies' cost of capital and lead to lower valuation multiples for stocks.

The equity risk premium recently stood at just 30 basis points versus a 20-year average of 300 bps.

Analysts expect S&P 500 earnings growth of 12.1% in 2024, which may be unrealistic if rates slow economic growth.

Historically stocks have performed decently despite higher interest rates, so negativity shouldn't be overdone.