Stock markets are declining today as bond yields are rising. We saw a similar phenomenon earlier this spring when bond yields rose and technology shares sold off. Then, the 10-year Treasury rose from under 1% to roughly 1.75% by the end of March. The 10-year yield retreated after this and made it down to 1.17% by early August. Currently it is trading around 1.55%. Generally, technology stocks are most impacted by rising bond yields because they tend to have higher stock price valuations that are calculated based on projected future earnings. Higher yields create higher discount rates for valuing those future earnings streams and thus the stocks become theoretically less valuable. Technology stock valuations have been lofty in this low yield environment, hitting levels not seen since the dot-com bubble.
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Commentaries are published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.
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