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Three key threats to equities from rising bond yields

The surge in bond yields that has accompanied the ratcheting up of rate expectations in the US has soured the outlook for the stock market there in three key ways. First, by raising the required return from equities. Second, by undermining the economic outlook. And third, by threatening to erode firms’ margins. The upshot is that we are sticking to our forecast for the S&P 500 to end this year lower than it is now.

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