The 10-year US Treasury yield is approaching the 5.5% red line! Societe Generale warns: Stock valuation support has failed, and US stocks may face a severe shock

The Zhitong Finance App learned that Alan Bokobsa, head of global asset allocation at Société Générale, said that the 5.5% yield on 10-year US Treasury bonds was a critical point where borrowing costs were too high, which crushed profit growth and began putting pressure on stock valuations.

Boko Busa pointed out that global profit expectations have risen sharply this year, so that the stock risk premium did not collapse even when yields rose. Since Monday coincides with the Labor Day holiday and spot trading is closed, the 10-year US Treasury yield is currently at 4.78%.

In an interview, he said, “The current price of the stock market is no more expensive than it was at the beginning of this year.” However, he warned that the 5.5% US Treasury yield mark will be a watershed moment, and the increase in profit expectations will no longer be enough to support current valuations — the tipping point where “stocks are beginning to be attacked.”

He said it is expected that the upcoming interest rate hikes by the Federal Reserve and the ECB will be “moderate” and are unlikely to be aggressive enough to break the current economic cycle or suppress concerns about higher inflation.

He described this broader trend as a “long-term rise” in nominal GDP, driven by successive fiscal spending in countries such as Germany and Japan, sticky inflation, and soaring capital demand to fund AI infrastructure. He sees this as a fundamental shift since the early 2020s, and there is little sign that this dynamic will reverse anytime soon.

The bond market recently regained the dominance of stock investors. Yields soared as the escalation of the US-Iran conflict re-fueled concerns about oil prices and inflation. The pressure is further exacerbated by hawkish signals from the Federal Reserve and the European Central Bank, fiscal concerns, and the growing competition for capital in the AI capital spending boom.

Grace Peters from J.P. Morgan Chase said last week that the 10-year US Treasury yield of 5% will be psychologically significant and may trigger a stressful rebound or decline in the stock market. Barclays Bank's Emmanuel Coe also said that the yield approaching 5% would make investors more nervous about the impact on the stock market.