The 'most important variable' to watch in markets right now: Morning Brief

Published On Jan 7, 2025, 6:00 AM

The current critical factor in the stock market is the rising 10-year Treasury yield, which has recently surged to levels above 4.6%. This increase has been correlated with a decrease in the S&P 500, and experts indicate that unless interest rates begin to decline, the anticipated broadening of the stock market rally may be stalled. Investors should focus on companies with stronger balance sheets as higher rates are seen as a negative for equities, especially smaller companies with higher refinancing needs. The potential for the Fed to lower rates may hinge on a slowdown in economic data, particularly in employment.