U.S. stocks have shown impressive resilience since April, with the advance broadening notably from July onward. However, analysts at Raymond James caution that the market’s strength depends on three key factors.
“This resilient U.S. equity market since April, which has broadened out meaningfully since July, has been built on three key conditions, in our opinion. Strong earnings … low oil … and importantly, the 10-year Treasury yield staying well-behaved (<4.5%),” the firm said.
The analysts pointed to robust corporate results, noting that second-quarter earnings were “remarkably strong, and remarkably broad in strength.” They also highlighted that oil prices are down roughly 10% so far this year.
Even so, the most important driver has been bond yields. U.S. 10-year Treasury yields have stayed below 4.5% despite “clear signs of at least modest inflation impacts from tariffs, increasing Treasury General Account (TGA), decreasing reverse repo, and accelerating loan growth.”
Raymond James contrasted this with global trends, where 10-year yields have climbed even as international growth has slowed and inflation pressures have eased. In the U.S., however, yields have “trended down, even as economic growth has been resilient, and inflation has not dis-inflated as it has in the rest of the world.”
The report also gave credit to Treasury Secretary Scott Bessent’s approach, suggesting it has been a supportive force for markets. “So far, his focus has worked, with almost assuredly a very positive impact on equities this year,” the analysts wrote.
Looking ahead, Raymond James believes the market will remain on solid footing if these conditions hold: “the U.S. equity market likely needs yields to stay <4.5% as inflation picks up modestly, corporate earnings to keep moving in the right direction, and oil/energy to remain subdued. So far, so good.”
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