Are rising bond yields a threat to stock markets?

Government bond yields are approaching five per cent, raising a crucial question for investors: could higher interest rates threaten global stock markets, or are bonds becoming a more attractive investment than equities?

In this episode of the Asset Allocator podcast, Simoney Kyriakou is joined by Joe Little, global chief strategist at HSBC Asset Management, to discuss the outlook for bond markets, interest rates, inflation and global equities as investors adjust to a higher-for-longer interest rate environment.

With US Treasury yields and UK gilt yields rising, Little examines what's driving the global bond sell-off, why inflation-adjusted yields matter and whether government bonds now offer a compelling alternative to stock market investing.

The conversation explores the risks higher bond yields pose to equity valuations, why strong corporate earnings continue to support US and European stocks, and what a sustained rise in borrowing costs could mean for investment portfolios.

They also discuss the resilience of the US dollar amid geopolitical uncertainty, the implications for emerging markets including China, India and Brazil, and whether the Federal Reserve, Bank of England and European Central Bank have enough room to respond to inflation without damaging economic growth.

Little also explains why central banks may deliver fewer interest rate rises than markets currently expect and how that could create opportunities for bond and equity investors.

Click here for more investment insights from HSBC Asset Management: Investment Insights | HSBC Asset Management

Timestamps:

00:00 - Why bond yields are rising

05:47 - Can higher bond yields hurt stock markets?

08:54 - Why the US dollar remains strong

13:03 - Are central banks running out of options?

16:17 - Have markets priced in too many rate hikes?

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