Yardeni Research sees peak Treasury yields creating buying opportunity for stocks and bonds

Ed Yardeni has spent decades telling investors when to lean in and when to duck. Right now, his message is: get ready to lean in.

Yardeni Research expects the 10-year US Treasury yield to peak somewhere between 4.75% and 5%, a level the firm views as a buying opportunity for both bonds and equities.

The yield climb that got us here

The 10-year Treasury yield has had quite a year. It started at 3.96% and has climbed to 4.63%, a move of roughly 67 basis points that has rippled across every corner of the market.

The S&P 500’s forward price-to-earnings multiple has moved in the opposite direction you’d expect given rising rates, climbing from 19.1 to 21.1. That divergence is exactly what has Yardeni watching for a potential P/E-led pullback. Stocks have gotten more expensive even as the discount rate used to value them has gone up.

The Fed factor and Kevin Warsh

Part of Yardeni’s thesis hinges on expectations around the Federal Reserve’s next moves, and specifically on the potential influence of Kevin Warsh as Fed Chair.

The research firm expects the Fed to hold rates steady in June and then pivot toward a tightening bias, with a possible rate hike in July under Warsh’s leadership.

Adding fuel to the higher-for-longer yield thesis: Brent crude prices hovering around $111 per barrel. Energy costs at that level feed directly into inflation expectations, making it harder for the Fed to justify rate cuts even if economic growth wobbles. Resilient US corporate earnings further complicate the picture, because strong profits reduce the urgency for monetary easing.

Yardeni’s bullish long-term view

Despite the near-term caution, Yardeni Research maintains a strikingly optimistic target for the S&P 500: 8250 by year-end.

What this means for investors

If 10-year yields do approach 5%, Yardeni’s research suggests that’s the zone where bonds start offering compelling real returns and where equity valuations are likely to have compressed enough to warrant new positions.

A P/E-led pullback driven by rising yields isn’t the same as an earnings-driven decline. The former tends to be shorter and shallower because the underlying business fundamentals remain intact. Companies are still making money. They’re just being valued at a lower multiple of those earnings.

Investors should also watch the Fed’s actual policy decisions relative to Yardeni’s expectations. A rate hike in July would confirm the hawkish trajectory and likely accelerate the yield peak. A hold, on the other hand, could extend the current ambiguity and keep yields grinding higher without a clean resolution.