Bonds are becoming harder for equities to ignore
For much of the past decade, investors were used to a market in which equities offered a much more attractive return profile than government bonds. Low interest rates and abundant liquidity helped sustain the bull market on Wall Street, with capital flowing heavily into technology stocks.
That backdrop is now changing. The equity risk premium, or the extra return investors expect for holding shares instead of government bonds, has fallen to its lowest level since the start of the century. The shift matters because it suggests that the relative appeal of equities over bonds is narrowing quickly.
The main reason is the level of US yields. The 10-year US Treasury yield is holding above 4.5%, offering investors a relatively high income stream from an asset class that is usually seen as safer than equities.
Source: CMC Markets, as at 27 May 2026.
Big Tech valuations leave less room for disappointment
At the same time, valuations across US technology remain elevated. The AI-led rally, driven by companies such as Nvidia, Microsoft and Apple, has pushed the and higher, but it has also made the market more sensitive to earnings disappointment.
