Rising Long-Term Rates Diminish Need for Further Rate Hikes

Zhao Yaoting, Global Market Strategist for Asia-Pacific at Invesco, notes that rising U.S. long-term interest rates have diminished the need for further rate hikes by the Federal Reserve.

The global bond market is sending a strong signal: funding costs have been significantly elevated on a structural basis, with U.S. long-term interest rates continuing to rise.

Zhao Yaoting believes that rather than focusing on whether central banks will cut or raise interest rates by 25 basis points, the ongoing upward trend in long-term rates deserves greater attention.

Rising yields will undoubtedly put pressure on the valuations of large-cap tech stocks, but Zhao Yaoting notes that the uptick in bond yields reflects the continued resilience of U.S. economic growth, suggesting that the tech sector's robust earnings performance could help offset some of the valuation headwinds.