Soaring bond yields ‘not a stock killer’ and stocks will still end up higher in 2021, says Tom Lee of Fundstrat


Tom Lee from Fundstrat.
  • Tom Lee of Fundstrat sees US stocks able to resume their rally even as bond yields climb, he told CNBC.
  • He said his previous call for “any rally” was put to the test as stocks slumped Tuesday.
  • Tech stocks fell as the 10-year Treasury yield surpassed 1.5%.
  • See more stories on the Insider business page.

Bond yields are rising rapidly, but stocks may still continue to climb until the end of 2021, Fundstrat’s Tom Lee told CNBC on Tuesday.

The bullish remarks coincided with a sharp drop in the stock market as the closely watched 10-year Treasury yield jumped to 1.56%, its highest level in three months. But Lee played down the spike, calling the rate the “big number,” while pointing to the positive reasons for the surge in yields.

“If the economy grows and strengthens and there is pent-up demand and shortages and that causes reflation and higher rates – obviously that’s very good profits. It’s good for the comeback. on invested capital, and that means higher interest rates, ”Lee said.

“But that’s exactly the environment from 1950 to 1970. I think anyone who really studies the markets would understand that rising rates are not a stock market killer,” he said in an appearance. on the economic information channel.

The rise in the 10-year yield hit the tech-focused Nasdaq 100 particularly hard, pushing the index down 2.5% in Tuesday’s session and extending its loss into a second day.

The high-growth group of stocks, including Amazon and Facebook, drove the market down, with investors seeing tech companies as the main beneficiaries of low interest rates that can fuel their business expansion.

A rise in yields this week was fueled in part by the warning from Federal Reserve Chairman Jerome Powell that disruptions in the global supply chain, a tight labor market and other factors could keep the higher inflation for longer than expected. Higher inflation could prompt the Fed to raise benchmark interest rates from near zero earlier than investors expect.

Lee predicted in August that US stocks could suffer a “whole rally” if COVID-19 cases recede this fall.

The rally’s screening was “really put to the test” on Tuesday, Lee said. “I think there has been a lot of damage to liking growth and tech trading and S&P techniques. But to me it just seems like a harbinger of a consolidation before a big move higher,” he said. -he declares. “I’m still convinced that it would all come together at the end of the year.”

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