The Federal Reserve Bank (‘the Fed’) controls the ‘Fed Funds Rate’, which sets the range for the interest rate banks charge each other for overnight loans, which affects the rate charged on credit cards, home equity lines of credit and savings, which impacts the flow of investment capital and the stock market. While this is an impressive amount of authority and influence, it is dwarfed by the primarily ‘market-driven’ 10 Year Treasury Rate (‘the 10 Year’), which sets the global benchmark for risk-free long-term returns, which drives mortgage rates, corporate debt, and asset valuation, and is widely regarded as the most influential financial metric in the world. If ‘the Fed’ is playing Pickle Ball at the local club, ‘the 10 Year’ is winning Wimbledon. The former reflects central planning efforts to manage domestic inflation and employment, while the latter reveals global investor consensus on the two subjects. What is the global investor consensus on the markets and economy today, and what should you do about it?
It was widely reported prior to the U.S.-Israeli attacks on Iran that the stock market had “priced-in” three additional 2026 Fed rate cuts.1 The attacks on Iran and the closing of the Strait of Hormuz (‘the Strait’) resulted in a rapid and significant rise in the oil price, the natural resource possessing the greatest effect on global inflation. Today the conflict persists, heightened tensions surrounding ‘the Strait’ continue, the oil price remains elevated with upward pressure, inflation reports are now surprising to the upside, and the expected 2026 Fed rate cuts are in question, a combination of factors one might think would invigorate a “risk-off” attitude on Wall Street. To the contrary! With a “Banish the Pessimism!” boldness, retail investors, especially prone to market mis-timing, have in the face of these developments driven the S&P 500 16% higher,2 largely in the single sub-sector of semiconductor chips. While it’s impossible to know when a speculative rally will run out of buyers, and while the stock market can remain irrational longer than you can remain solvent, ‘the 10 Year’ is in the meantime on the rise,3 presenting a contrary assessment of these conditions. Respect the rally but never follow the herd; make sure your investment risk management plan is in place.
The broad bond market was enjoying steady 2026 returns that noticeably exceeded risk-free Treasury money market accounts earlier in the year, when ‘the Fed’, was peddling the rate cut narrative;4 since ‘the 10 Year’ began its march higher, however, it has faltered and is now posting a paltry .1% 2026 return.5 During the May 6, 2023 Berkshire Hathaway annual meeting Warren Buffet declared the long-term era of declining interest rates was over, and recent market conditions have generally aligned with that view. Retail bond investors should at minimum consider the possibility that the general direction for long-term interest rates is now up and carefully consider the risk lower quality and longer-term bonds are subjected to by this dynamic.
It’s more challenging to gauge the timing of the effects a rising ‘10 Year’ yield will have on the U.S. and global economies due to parabolic technological advancement (and its impact of increased economic efficiency), but rising yields are a restrictive factor in regard to capital flows, and ‘the 10 Year’ is a critical primary metric in the conversation. I believe ‘the 10 Year’ yield should be monitored closely by investors at this juncture, and workers should continuously increase specialization in their chosen field in an effort to preserve ever-increasing, irreplaceable value: learn to serve people well!
Think about it, Shaun
“Do you see a man skillful in his work? He will stand before kings; he will not stand before obscure men.” ~Proverbs 22:29
“Whatever your hand finds to do, do it with your might” ~Ecclesiastes 9:10
1 Financial CONTENT, by Market Minute, “The Fed-Market Standoff: Wall Street Defies “Higher for Longer” with Bold Bet on Three 2026 Rate Cuts”, March 27, 2026
2 Yahoo Finance, S&P 500 price chart, March 27, 2026 & May 14, 2026
3 US Department of the Treasury, Daily Treasury Par Yield Curve Rates, January 1, 2026 through May 13, 2026.
4,5 Yahoo Finance, Price Chart of Vanguard Total Bond Market Index Fund (BND) vs. Schwab Treasury Obligations Money Fund (SNOXX), January 1, 2026 – May 14, 2026
Disclosure(s)
The views expressed herein are those of the author as of the date published and are subject to change without notice. This material is provided for informational and educational purposes only and should not be construed as individualized investment, legal, tax, or accounting advice, or as a recommendation to buy or sell any security or adopt any investment strategy.
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