If you want to understand where the stock market is headed and what to do about it, watch the bond market. In particular, keep your eye on the yield offered by the 30-year US Treasury bond. Historically, when that yield hits 5% or more, stocks have faltered.
Spoiler alert: The 30-year Treasury yield has risen as high as 5.09% in 2025 and recently was at 4.97%. For current US Treasury yields: Bloomberg.com/markets/rates-bonds, and then click “US” in the menu near the top of the page.
Long-term Treasury yields have moved up dramatically in the past year because bond investors are demanding bigger payouts for loaning money to the US government. They lack confidence in US fiscal policy—Moody’s recently stripped the US of its AAA credit rating—and the lack of political will in Washington, DC, to reduce the federal debt of more than $36 trillion.
If we can’t get that debt under control, 30-year Treasury yields could be headed toward 6%, and that makes stocks much less attractive. Why take risks in the market if you can get a guaranteed 5%-to-6% return from a government bond? At the same time, rates on mortgages and consumer and corporate loans are rising because they are benchmarked to long-term Treasury yields. That slows economic growth and further weighs on stock valuations
What to do if the 30-year Treasury yield keeps rising…
Avoid broad market indices like the S&P 500, which already has stretched valuations and will suffer. I expect the spread between winning and losing stocks will widen. Companies that have advantages include those with low debt-financing needs and those tapping into artificial intelligence, a monster secular trend for the next decade.
Invest in long-term Treasuries only if you plan to hold them until maturity. Instead, stick with short-term Treasuries, which still offer solid yields. Reason: If long-term yields jump, the value of those Treasuries fall precipitously. (Remember: Bond yields move in the opposite direction of their prices, and the longer the maturities, the wider the swings.)
