Why the Bond Market May Be the Stock Market's Biggest Risk

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With US 10-Year Treasury yields climbing this week to the highest level since 2007, the bond market may be the biggest risk to further equity gains, says Tony Pasquariello, global head of hedge fund coverage in Goldman Sachs FICC and Equities. Shorting bonds could be a useful hedge for stock investments, he says on The Markets podcast. S&P 500 earnings growth, meanwhile, has been “mind-bending,” helping to keep valuations from becoming stretched, Pasquariello says. However, the increase in earnings may begin to taper off, and US stock returns may slow from their double-digit annual pace. He also sees opportunities in Japan’s TOPIX, as the country’s equity market gets a boost from…