PodcastAdam Taggart | Thoughtful Money®John

Have Rising Bond Yields Just Killed The Bull Market In Stocks? | New Harbor Financial

The discussion links rising borrowing costs to stress in AI investment, marginal projects, weaker companies, and government finances. Market gains remain concentrated in a narrow group of stocks, while elevated valuations, shifting Treasury yields, and greater credit-market appeal create potential pressure on equities. The speakers also see conditional upside for gold, silver, and credit, while warning that stocks could face a sharp correction, a blowoff top, or flat-to-negative returns over the next decade.

Interest RatesFixed IncomeMarket ValuationsEquitiesMarket BreadthGold

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Key Takeaways

The speakers present aggressive AI investment as vulnerable to rising financing costs, customer defaults, and competition with the U.S. government for capital, citing Oracle’s Texas data-center project and Nvidia’s financing and insurance efforts as early warning signals. Because market leadership has remained concentrated in a small group of AI-related stocks, a 10% to 15% reduction in AI capital-spending estimates could weigh heavily on broader equities.

The speakers argue that the Federal Reserve’s earlier quantitative easing lowered long-term borrowing costs and reduced investment hurdles, allowing marginal projects and zombie companies to persist. Higher rates could now expose those weaknesses, although the much larger federal debt burden also means rising interest payments may crowd out other government spending.

The episode links elevated equity risk to narrow market breadth, historically high valuations, and record corporate margins and earnings expectations that may eventually normalize. The speakers say capital could rotate toward credit if it offers equity-like returns with less risk, particularly if moderating inflation and weaker oil pressure improve real credit returns.

Treasury-market repricing has shifted the curve from inversion toward a more traditional upward slope, with especially large changes in the one- or two-year through 10-year segment and greater price sensitivity in long-duration bonds. At the same time, market pricing assigned a 65% probability to no Federal Reserve rate change at the October 28 meeting versus about 35% for a hike.

Credit conditions appear relatively calm in aggregate, with broad high-yield spreads around 3%, but the more pronounced widening in CCC spreads suggests stress is emerging first among weaker issuers. This deterioration supports the speakers’ broader view that higher financing costs may expose marginal borrowers and investments.

The speakers identify roughly 6% to 6.5% on the 10-year Treasury as a possible debt-service stress point, while also discussing a potential eventual decline toward 3% or even 2% if yields become unsustainable. One scenario has an equity decline triggering that substantial Treasury rally, although a move toward roughly 4.8% to 5% is also presented as possible before an eventual market top.

TECHNOLOGY

AI Investment Stress — Oracle’s Texas data-center project and Nvidia’s customer-financing and insurance efforts are presented as early signs that aggressive AI investment may be facing financial stress. Higher capital costs, potential customer defaults, and competition with the U.S. government for financing could undermine projected data-center construction.

“Earlier, I think I guess late last week, Oracle, for example, pulled the force majeure clause on a data center that they're building in Texas, I think…”—

ECONOMY

Rates, QE, Malinvestment — The Federal Reserve controls short-term rates more directly than longer-term yields. Quantitative easing pushed longer-term rates to unusually low levels and reduced investment hurdles, which speakers argue may have allowed marginal investments and zombie companies to persist.

“We always want to distinguish a short end of the curve that the Fed can control and longer end that arguably the market controls, not the Fed.”—

Debt-Service Crowding — The impact of higher yields depends on today’s much larger debt burden. Rising federal interest payments can crowd out other government spending and make the economy less able to tolerate high borrowing costs.

“but we are in a wildly different situation today in terms of total government debt outstanding, total debt in the system…”—

MARKETS

Narrow Market Breadth — The S&P 500 remains near its all-time high, but weakness beneath the index shows that gains are concentrated in a narrow group of stocks. The speakers say this deterioration led them to take defensive measures in client portfolios.

“so, I don't know that it's, cost of capital that's immediately having an impact on markets, but we're definitely seeing a weakening of the surface, the breath in the market…”—

Equity Valuation Risk — The speakers describe stocks as supported by record corporate margins, record earnings projections, and historically elevated valuations. Because these conditions are cyclical and extreme, they may eventually disappoint and normalize.

“We have record margins that you know you can you could almost trace that back to the you know kind of the big picture economic reality that when the federal…”—

Equity-Credit Rotation — When credit offers returns comparable to equities with less risk, marginal capital may shift from stocks toward credit. That rotation would create a headwind for equities.

“So you know just mathematically I can get x return in the equity market with a degree of risk right and I can get y return in the credit market…”—

FORECASTS

Treasury Yield Ceiling — The speakers identify roughly 6% to 6.5% on the 10-year Treasury as a possible practical stress point because of the government’s debt and interest burden. They also discuss a possible eventual reversal toward 3% or even 2%, while acknowledging that yields could become more extreme first.

“we think there's a far more practical upper limit before things really start to break…”—

Yield-Driven Market Top — One speaker says a severe equity decline could cause Treasury yields to fall substantially. A more moderate decline toward roughly 4.8% to 5% on the 10-year is also presented as possible before an eventual equity-market top, which the speaker places within the next couple of quarters.

“I don't really see bond yields coming down substantially until the stock market tops. And who knows when that's going to happen…”—

Market-Top Risk — The speakers assign roughly a 30% to 40% possibility that higher rates themselves put in the stock-market top. They also say persistently high rates, worsening wars, AI disappointment, and extreme valuations could cause the market to roll over.

“Shoot. I don't know. Maybe maybe 30 40% something like that, right?”—

Rising Capital Costs

The speakers introduce rising Treasury yields, explain how borrowing costs affect investment and markets, and note that narrow technology leadership masks broader equity weakness.

Credit Versus Equities

Higher bond yields make credit more competitive with stocks, especially as inflation moderates, potentially encouraging investors to shift toward higher-quality fixed income.

Treasury Curve Signals

Charts show a higher, more normally shaped Treasury curve, changing expectations for Federal Reserve policy, and growing stress in lower-quality credit spreads.

Malinvestment And AI

The speakers argue that prolonged cheap money funded unproductive projects and that rising financing costs are beginning to expose vulnerabilities in AI data-center investment.

Debt-Service Breaking Point

They debate how high Treasury yields can go before excessive government interest costs, corporate refinancing burdens, and debt crowd out other economic activity.

Stock Market Top Risks

Rising yields could end the equity advance, but the guests also see plausible outcomes involving a final blowoff top followed by a severe decline.

AI Capex Vulnerability

Concentrated market gains and extreme valuations leave equities vulnerable if AI enthusiasm, data-center spending, or projected technology earnings begin to weaken.

Tactical Portfolio Defense

New Harbor emphasizes preserving client capital, reducing equity exposure modestly, and using bonds as a tactical alternative during a potentially difficult decade for stocks.

Navigating A Lost Decade

The guests expect the next decade could deliver flat or negative stock returns through major declines, while tactical positioning may improve outcomes without requiring perfect timing.

Investor Risk Frameworks

DIY investors are encouraged to define their market bias, understand their emotional behavior, control losses, and avoid overcommitting to any single forecast.

Real Yields And Gold

The speakers explain how real yields affect precious metals and argue that falling real yields, central-bank buying, and currency concerns could support another gold rally.

Gold And Silver Pullback

Despite extended corrections in gold, silver, and mining shares, the guests view the pullbacks as potentially normal within a larger precious-metals bull market.

Year-End Financial Planning

The discussion turns to year-end planning, including Roth conversions, qualified charitable distributions, required distributions, tax strategy, and spending retirement assets meaningfully.

Tax And Withdrawal Strategy

John and Adam stress that personalized planning can optimize account withdrawals, tax exposure, retirement goals, and responses to different market scenarios.

New Harbor Consultations

The guests describe their experience reviewing portfolios and financial plans, while Adam explains how viewers can seek personalized guidance from New Harbor advisers.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

No Guarantees: Past performance does not predict future results; investing carries risk.

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