Yield Jitters Loom as Oil Prices Fuel Inflation Concerns

JPMorgan's Grace Peters has sounded a warning about rising yields and their potential impact on stocks. She noted that higher oil prices are driving up inflation concerns, pushing the 10-year Treasury yield to around 4.8%, just shy of the 5% threshold that can be unfriendly to equities. The 30-year Treasury has also hit a 19-year high.

Peters pointed out that September is often a challenging month for stocks, as it's historically been the S&P 500's weakest month on average over the past 25 years. Despite this, she expects additional gains in US and European shares this year, but cautions that a 5% to 8% drop is possible heading into November's US midterm elections.

Peters also emphasized the importance of steady investing, particularly when yields and headlines shift. She noted that the surge in second-quarter earnings is unlikely to last, with growth rates expected to slow down. However, she sees a healthier setup than a tech-only rally, as various sectors such as financials, industrials, and utilities have made meaningful contributions.