The bond market panic shouldn’t deter investors from putting money into stocks, the CEO of one of the nation’s biggest investment advisors says.
Penny Pennington, the CEO of Edward Jones, said the bull case for stocks remains intactm despite a bruising sell-off in government bonds that’s sent yields to their highest levels in nearly a quarter century.
The fear has been that surging yields will put pressure on stock prices, but the bull market is still largely being carried by strong economic growth and enthusiasm for the AI trade, Pennington told Business Insider on Thursday.
“We’re still risk on,” Pennington said. “The market seems to be climbing a Wall of Worry right now.”
“I’m just never going to bet against America,” she added regarding the potential for the US market to continue delivering the best returns relative to global equities.
The spike in Treasury yields has garnered more attention in markets lately as investors fret over inflation and predict higher interest rates from the Fed. The yield on the benchmark 10-year US Treasury yield rose to its highest level since 2002 this week, attesting to the perception that rates need to be higher to tame inflation, and that the US economy is likely strong enough to handle higher borrowing costs
The 5% mark has long been a critical threshold for investors to start worrying that higher yields will hurt stock prices, but the market has been resilient amid the recent spike to above 5.3%.
The secret sauce has been the economy, which is expected to grow at a brisk pace of 3.7% in the third quarter, per the latest Atlanta Fed GDPNow reading. Business growth also expanded at its fastest pace in five years in September, according to S&P Global.
Analysts on Wall Street have also pointed to strong earnings and increased optimism in the AI trade as two other factors propping up stocks.
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Any “wild card” for stocks will likely stem from a disruption in the AI sector as opposed to higher interest rates, Pennington said.
The tech sector has been volatile lately as investors have navigated existential concerns about AIÂ alongside newfound excitement for AI agents. The Roundhill Magnificent Seven ETF, which tracks the seven tech giants at the center of the artificial intelligence boom, is up 6% over the last month.