The tech-heavy Nasdaq 100 could plunge 20% from its peak should treasury yields rise to 2%, according to a report.
- Analysts from Ned Davis Research said a 2% hike in 10-year treasury yields would likely cause the bond yields on Baa-related bonds to reach 4.5%. This would require a 20% drop in Nasdaq to keep their relationship consistent.
- Earnings yields and corporate bonds forecasts have moved in tandem since 2014, and the calculations depend on other relationships holding steady.
- Strategists agree and said the impact could be steep as the Nasdaq Composite is trading on 31.5 times earnings.
- The 10-year Treasury yields rose as high as 1.61%, while Nasdaq 100 Futures fell by 1.22%.
- Analysts remain bullish on stocks amid the risks due to the increase in economic margins after the improvement in cash flows and the fall of capital costs with interest rates.