Goldman Sachs economists expect that rates will continue to rise in the coming months.
Goldman analysts believe that stock valuations should be able to digest a 2% 10-year yield easily.
As such, they share 29 stocks that are still cheap within the high-absolute-valuation stock market.
After reaching a new 12-month high of 1.62% on Friday, 10-year Treasury yields retreated slightly to land at 1.61% as of Monday afternoon.
But interest rate volatility is unlikely to fade away anytime soon. The Cboe Interest Rate Swap Volatility index, which measures the implied volatility of Treasuries, was at its highest level since last March on Friday.
Goldman Sachs economists also expect that rates will continue to rise in the coming months, forecasting an 11% pace of real US GDP growth in the second quarter. As the economy continues to recover and reopen, they predict that the 10-year yield will rise to 1.8% by mid-year and 1.9% by year-end.
Your weekly outlook
The past week in the stock market saw a few more flashes of the long-awaited rotation out of mega-cap tech stocks, and into beaten-down value names. On Monday the tech-heavy Nasdaq 100 bottomed out more than 10% below recent highs before saving some face later in the week. Many popular meme stocks were collateral damage.
But the Nasdaq may have an ace in the hole in the form of the $1,400 stimulus checks due to hit Americans bank accounts as soon as this weekend. A recent survey from Deutsche Bank found that half of all people between the ages of 25 and 34 plan to use the money to buy stocks.
For now, though, the coast seems to be clear for stocks, according to Jordan Kahn, the chief investment officer at ACM Funds and comanager of the ACM Dynamic Opportunity Fund, which takes a long-short approach that s somewhat in the fashion of a hedge fund.
In addition to the gargantuan stimulus package that will be supportive of consumer spending, equity investors can rely on the fact that the global recovery is still in its early stages, interest rates remain low, and the Federal Reserve is committed to quantitative easing, Kahn told Insider on Wednesday.
He said he thought it would take several rate hikes from the Federal Reserve before stocks were hurt. As of now, it appears that the Fed will keep the federal funds rate near zero at least into 2022, if not longer.
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Growth stocks struggled to stage a comeback amid the broad market rebound this week.
And elevated market volatility is driving demand for single-stock ideas, according to UBS.
The bank shares 13 most compelling counter-consensus stocks and why they are set to outperform.
As investors continued to rotate out of high-growth tech stocks and into once out-of-favor value stocks, contrarian stock pickers who saw it coming are the ones being rewarded handsomely for bucking the trend.
After months of bubble warnings in the market, many high-flying stocks have fallen back to earth. Electric-vehicle maker Tesla has plunged almost 14% in the past month despite having rallied 9.4% over the past week as of Thursday morning.
And as tech-share prices surged, more and more investors wanted in, which pushed prices up even further. As Morgan Stanley Chief US Equity Strategist Mike Wilson put it, momentum begets momentum.
As the global economy gets set to reopen, and consumers get ready to spend their savings and coming stimulus checks pushing inflation and therefore interest rates higher, which hurts growth stocks Wilson sees new momentum leaders in the making. The shift we have been highlighting in the composition of momentum is not over and the factor will continue moving toward cyclicals, lower quality, value, and small caps at the expense of the longer duration growth, Wilson wrote in a March 8 note.