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- US equities are extremely sensitive to bond yield moves – SocGen
US equities are extremely sensitive to bond yield moves – SocGen
How high is too high for bond yields? These are Société Générale’s best-estimate ranges for US 10-year yields in various scenarios.
Bond yields have a substantial impact on the S&P 500
No recession: US 10y yields ranging between 4-5%, S&P 500 = 4,050-4,750.
Mild recession (SG 2024e base case): US 10y yields ranging between 3-3.5%, S&P 500 = 3,800.
Hard landing (recession): US 10y yields ranging between 2.5-3%, S&P 500 = 3,100-3,500.
Irrational exuberance (no landing and risk of a global event trigger Fed easing): an ‘exuberance’ value for the S&P 500 in this scenario would be new highs.
We expect profit growth to accelerate over the next two quarters, hence our S&P 500 target range of 4,050-4,750. A mild recession in the middle of 2024 should lead to a higher risk premium, driving the S&P 500 back to 3,800.
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