With the latest jobs numbers out, a lot of attention is on the bond market, and rightly so. Thus, today’s piece will focus on U.S. 10-Year Treasury (US10Y) and what its future direction could mean for stocks. 10-year yield: Daily The 4.2% mark has been both literally and figuratively the 10-year yield’s line in the sand for the past year. It was key support for much of 2025 before the yield pierced it in this past September. We then saw a very clear inverse head-and-shoulders pattern take shape through December, which finally led to a breakout just last month. And just as inflation chatter was heating up again, the yield reversed lower and is now back below 4.2%. In other words, nothing has changed yet so far in 2026. 10-year yield: Now vs. 2020-22 Looking further back, if the three-plus-year symmetrical triangle that the 10-year yield has formed since early 2023 looks familiar, it should — because a very similar formation took shape from 2020 through early 2022. While rates were much lower back then (starting near zero post-Covid), equities handled the gradual rise in yields — until the monster breakout in 2022. That breakout occurred as the Federal Reserve played historic catch-up to combat inflation they had initially labeled “transitory.” While we’re still expecting more rate cuts than hikes at this point, that could change quickly. The 10-year yield will tell us what the market is thinking — and it will react to commodities, which began rallying in 2020 and continued through mid-2022. The key difference between the two patterns is momentum, shown by the 14-month relative strength index. In 2020–2021, RSI surged after rates bottomed, making higher lows and higher highs and confirming the breakout. That strength helped drive the 10-year yield above 1.70% in early 2022, leading to a powerful nine-month advance. This time is different. RSI has been making lower highs since late 2023, and the 10-year’s rallies have been muted, barely holding its uptrend line. A breakout would require a clear momentum shift. Long-term chart Zooming back to the 1960s provides important context. The 2020 low increasingly looks like a generational bottom, especially after the first monthly overbought reading since 1982. However, the first monthly overbought condition occurred in the mid-1960s, which preceded a multi-decade rise in rates. Notably, that entire stretch saw no oversold monthly readings until well after the 1980s peak. As long as we don’t see an oversold condition now going forward in the monthly work, the long-term bias in rates likely remains higher — even if the path includes years of mean reversion. This is a slow, structural cycle, so we need to be mindful of any short-term pop or drop. 10-year yield & stocks Lastly the big question is: what does this mean for equities? If we go back to 2020, one thing is clear — the S & P 500 has moved higher the vast majority of the time, and for much of that stretch, rates have been rising. So, the issue isn’t simply whether rates go higher from here. It’s how quickly they rise. When the 10-year yield surged from the low 1% area at the start of 2022 to roughly 4% in about 10 months, the market didn’t like it. The S & P 500 fell approximately 25% from high to low during that period. The speed of the move — not just the level — created the stress. Since then, however, the 10-year yield has been essentially flat for more than three years, and equities have handled that just fine. Trading ranges in rates — regardless of the absolute level — have proven to be a workable blueprint for stocks. Another important layer: the 2022 rate spike came after nearly two years of strong gains for the S & P 500. That combination — extended equity strength followed by a rapid rate surge — set up the bear market. If we were to see rates move considerably higher again, especially after the strong run equities have enjoyed over the last few years, that pairing could create a similar bearish scenario. That’s not the base case — but it is a potential outcome to keep in mind as we move through the rest of 2026 if the same factors start to emerge again like we saw in late 2021/early 2022. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
