Despite rising geopolitical tensions and tightening financial conditions, U.S. equities have shown remarkable resilience, heavily shielded by a robust earnings boom driven by the artificial intelligence (AI) capital expenditure cycle. According to Jefferies’ global head of equity strategy, Chris Wood, strong corporate earnings—particularly within the technology and semiconductor sectors—have helped stocks largely brush off escalating bond market pressures.
However, beneath the surface of the equity rally, fixed-income markets are flashing serious warning signs. G7 government bonds are entrenched in a structural bear market, with benchmark 10-year and 30-year Treasury yields climbing to multi-decade highs. This severe bond market rout has driven up volatility and caused high-yield corporate spreads to widen, raising concerns about hidden vulnerabilities in private credit and broader financial conditions that could eventually threaten equity valuations if long-term returns on massive AI investments fail to materialize.
