JPMorgan warns that rising bond yields could lead to a 5% to 8% correction in the stock market

JPMorgan's Global Head of Investment Strategy, Grace Peters, stated that as global stock markets face a historically weak performance in September, persistently rising bond yields pose a key risk to equities worldwide. Peters expects that there is still further upside for both US and European stock markets this year, but she cautions that with risk events such as the November US midterm elections approaching, stock markets may experience a 5% to 8% pullback. She describes this as a healthy correction, rather than a sign of structural market deterioration. The continuous rise in bond yields has become a primary concern for equity investors. The market is increasingly worried that rising oil prices will push up inflation, sending the yield on the 10-year US Treasury to 4.8%, approaching the 5% level that is commonly considered unfavorable for stocks; meanwhile, the 30-year US Treasury yield has risen to its highest level in 19 years. There is growing speculation that policymakers will be forced to raise interest rates, pushing yields back to levels seen before US Treasury Secretary Bessant expanded repo operations to control long-term borrowing costs.