ARK Invest CEO Cathie Wood says stocks can keep rising with the 10-year Treasury yield above 5%. She argues that higher rates show a market working without heavy Fed control.
Her comments followed a chart from ARK’s Frank Downing that plots yields and the S&P 500 since 1980. It shows the 10-year yield at 5.18% and the index near 7,743.
Why Cathie Wood Welcomes Higher Rates
Wood wrote on X that the Fed, not the market, was in charge when rates sat between 0.5% and 2%. Today, she says, the market is working again.
She also pointed to 2017. That year, the Fed raised rates, yet long-duration stocks had a strong run, according to Wood.
Her September 22 investor letter makes a longer case. Drawing on 230 years of data, Wood argues that the slide in rates from 1981 to 2021 was the outlier. Before the Great Depression, yields of 5% to 6% were normal.
Is the 10-Year Treasury Yield a Threat to Stocks?
Wood expects long-term yields to approach 5% to 6% as technology lifts productivity and growth. She also sees short-term rates climbing to 6% to 8% alongside nominal growth.
Meanwhile, she says real-time data shows cooler inflation than official figures suggest. For example, Truflation, an independent daily inflation tracker, put July headline inflation at 2.5%. By comparison, the government’s Personal Consumption Expenditures (PCE) price index showed 3.7%.
As a result, Wood suggests balanced portfolios could hold more stocks than the classic 60/40 split. Goldman Sachs’ Anshul Sehgal has made a similar call, favoring AI over bonds.
Still, not everyone shares her calm. Janus Henderson macro head Michael Contopoulos warned that the market is nearing its top as Fed tightening lifts yields.
Traders are also weighing a possible October Fed rate hike, which could hit risk assets, including Bitcoin.
Whether earnings can grow faster than borrowing costs may decide who is right. For now, Wood is betting that higher rates and higher stock prices can coexist.