Societe Generale SA's head of global asset allocation, Alain Bokobza, warned that a 10-year US Treasury yield of 5.5% represents the threshold where higher borrowing costs would overwhelm earnings growth and pressure equity valuations. Speaking on Bloomberg Television, Bokobza noted the yield currently sits at 4.78% and that equities are not more expensive than at the start of the year due to dramatic worldwide earnings upgrades keeping risk premiums stable.

However, he cautioned that at 5.5%, earnings improvements would no longer justify valuations, marking the point where "equities start to be attacked." Bokobza expects upcoming Federal Reserve and European Central Bank rate hikes to be "muted" and insufficient to break the economic cycle or quell inflation fears. He described a "secular rise" in nominal GDP driven by fiscal spending in Germany and Japan, sticky inflation, and surging capital demand for AI infrastructure buildout — a fundamental shift since the early 2020s.

The bond market has regained control over stock investors recently. Yields have surged amid the escalating US-Iran conflict reigniting oil prices and inflation concerns. JPMorgan Chase & Co.'s Grace Peters said a 5% yield would be psychologically significant, while Barclays Plc's Emmanuel Cau noted it would make investors much more nervous about equity implications.