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News2 min read·2026-10-12DisconfirmAI Editorial

Asset Allocation Blogger James Picerno: Why Rising Treasury Yields Haven't Broken the Equity Bull Market Yet

James Picerno argues that despite surging Treasury yields, high-beta and momentum factors remain in leadership, the SPY-to-USMV ratio continues trending higher, and S&P 500 Q3 earnings estimates are above their start-of-quarter levels. He explains how these internal signals form a diagnostic framework for distinguishing a temporary pause from a genuine correction, and what conditions would invalidate that reading.

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Original publication time 2026-10-05 19:47 GMT+8

In an article dated October 5, 2026, asset allocation blogger James Picerno addresses a central contradiction: while bond yields have risen sharply over the past month—typically a headwind for stocks—the S&P 500 is trading near record highs with volatility at historically normal levels. Picerno argues this resilience is supported by internal market structure, and that unless specific conditions change, current weakness represents a pause in the uptrend rather than the start of a prolonged correction.

Picerno's analytical framework focuses on a factor lens. He notes that the key drivers of this year's rally, particularly High Beta (SPHB) and Momentum factors, continue to lead by a wide margin year-to-date. Large-cap growth funds like IVW rallied to new highs last week. These signs indicate that investors have not fled risky assets due to higher rates but are instead continuing to seek opportunities in stocks sensitive to economic expansion.

To quantify this risk appetite, Picerno cites the ratio of the broad market ETF (SPY) to the low-volatility ETF (USMV). Typically, when uncertainty rises, investors rotate into low-volatility stocks as safe havens, causing this ratio to fall. However, current charts show the SPY:USMV ratio trending higher, suggesting investors are inclined toward risk-taking and downplaying concerns about further increases in interest rates and inflation. Meanwhile, defensive characteristics such as high-dividend stocks (VYM) and small-caps (IJR) have shown relative weakness, reinforcing the flow of capital into offensive assets.

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Beyond internal market signals, Picerno emphasizes fundamental support. Citing FactSet analyst John Butters, he points out that Q3 earnings estimates for the S&P 500 are higher today than at the start of the quarter, with the index expected to report over 25% earnings growth for the third consecutive quarter. Simultaneously, the Atlanta Fed's GDPNow model forecasts a solid improvement in Q3 GDP compared to Q2. These data points form the bedrock of the bullish narrative: if corporate profits and economic growth can offset rising financing costs, higher yields can be interpreted as a byproduct of a strengthening economy rather than a warning sign of recession.

However, Picerno also highlights the potential challenge to this optimistic view. He stresses that the fuel powering the bull market is ultimately tied to corporate earnings. If energy prices spike or inflation worsens, leading to downward revisions in earnings expectations, or if cracks begin to emerge in factor leadership, the current resilience will face severe tests. For investors, the key lies not in predicting rate movements, but in monitoring whether these specific internal market indicators and earnings data begin to diverge from the current positive trend.

Sources

  • 原文与论证capitalspectator.com↗
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