Key Wealth Investment Brief

Key Takeaways:

Earnings continue to amaze.

Coming into the second quarter, analysts were expecting earnings for the S&P 500 (in the aggregate) to grow by roughly 23% in the quarter. With 61% of the companies in the Index having reported, actual earnings growth is approximately 47%, according to FactSet.

Alphabet and Amazon are a major reason for the surge in earnings, as they reported net unrealized gains from their investments in Anthropic that added $98 billion and $53 billion to their earnings, respectively. However, even if Alphabet’s and Amazon’s earnings are excluded, the earnings for the S&P 500 grew 29% in the second quarter – a very impressive rate.

Moreover, of the companies that have reported, 77% have exceeded sales forecasts and 86% have exceeded earnings forecasts; both metrics are considerably above their historical averages.

A lackluster GDP number is hiding a surprisingly robust core GDP.

The advance estimate of Q2:2026 gross domestic product (GDP) was reported last week. The economy grew 1.5% in the quarter, down from 2.1% in the first quarter. However, final sales to domestic private purchasers, also known as “core GDP,” grew 3.9% in the quarter. Growth was boosted by strong consumer spending and investment in technology/artificial intelligence.

The components of the GDP report that were a drag on the overall growth number were net exports, which were likely negative due to companies trying to front run the introduction of new tariffs, and government spending, which was dragged down by oil sales from the strategic reserves, according to Evercore ISI.

The recent rise in bond yields validates our thesis that we are still in the midst of the “Old Normal” interest rate regime.

From the 1940s until the 1980s, U.S. interest rates steadily increased. After interest rates peaked in the 1980s, the U.S. experienced a steady decline in rates over the next 40 years, highlighted by interest rates hovering near zero in the 2010s. In other updates and, most notably, in our 2024 Outlook, we have argued that interest rates would be higher for longer, the days of zero-percent interest rates were over, and investors should anticipate a return to the “Old Normal.”

Beginning in 2025, long-term interest rates have been gradually climbing and are now back to multi-year highs. Thus far, equities have been able to withstand higher interest rates, but at some point, higher rates could prove to be a headwind for equities. Thus, investors should use periods of market strength to ensure their portfolio is sufficiently diversified as we outline below.

Bottom Line – how to invest now.

We expect volatility to remain elevated, and we continue to advocate for robust diversification. Bonds may continue to struggle to add ample diversification amidst an environment of larger federal deficits and higher interest rates. Bonds may show higher correlations with stocks in such an environment, leading to less portfolio diversification. To gain the desired diversification in a portfolio, we continue to emphasize the use of New Tools where appropriate. We also note that international markets may also provide additional diversifying qualities and believe opportunities exist beyond large cap growth equities.

Even before the Iran War, we held the view that inflation could be persistent (due to rising nationalism along with other forces). The Iran crisis adds a material new source of risk, and although we don’t see history repeating itself in lock-step with the 1970s, investors may want to maintain allocations to real assets after the conflict ends.

In sum, real investors need real assets, and U.S. investors need exposure beyond U.S. financial assets and concentrated indexes.

Equity Takeaways:

Stocks were positive in early Monday trading. The S&P 500 rose approximately 0.2%, to 7505, while the tech-heavy Nasdaq was flat. Small caps were up 0.1%, and non-U.S. stocks were mixed.

The S&P 500 rose approximately 1.1% last week as strong earnings releases continued. Year-to-date, the large-cap index is up 10.1%, while small-cap and value stocks are leading the way. Large-cap value stocks are outperforming their growth counterparts by more than 20 percentage points (as measured by the Russell 1000 Value/Growth Indices), while small-cap core is leading large-cap core by approximately 9 percentage points (as measured by the Russell 2000/1000 Indices).

The S&P 500 has been consolidating in recent weeks, leading to relatively muted returns. We expect these muted returns to continue as we head into August and September, which are historically the two worst months for S&P 500 performance.

Fixed Income Takeaways:

The yield curve experienced a bear steepening last week, as short-term yields fell and long-term yields rose. Specifically, at the short end, 2-year yields moved 4 basis points (bps) lower, closing the week at 4.29%. Longer out on the yield curve, 10-year yields moved 6 bps higher to close the week at 4.74%, while 30-year yields moved 11 bps higher to close the week at 5.27%, the highest level since 2007.

The rise in long-term yields likely occurred due to rising inflation concerns and discontent with the Federal Open Market Committee’s (FOMC) decision to hold interest rates steady at their meeting last week. The Committee’s decision was not unanimous, as three members voted for a 25 bps rate increase (0.25%). Market participants are worried that inflation will become entrenched if the Committee does not act soon. Fed Chairman Warsh believes that the market is carrying out passive tightening on its own as long-term real rates have risen. In addition, Investment Grade and High Yield spreads widened during the month of July.

In early Monday trading, yields were lower: 2-year Treasury yields were trading at 4.25%, 5-year Treasury yields at 4.40%, 10-year Treasury yields at 4.69%, and 30-year Treasury yields at 5.23%.

Holding Rates, Raising the Bar

Warsh keeps policy steady, welcomes debate, and reinforces the Fed’s commitment to its 2% inflation target.

The Federal Reserve left the target range for the federal funds rate unchanged at 3.50% to 3.75% at today’s meeting, a decision that was mostly anticipated by the financial markets. While the policy action itself came as no surprise, the meeting provided further insight into Chair Kevin Warsh’s evolving leadership style and the Committee’s approach to monetary policy.

The statement changed only modestly, but the press conference offered a clearer picture of how this Federal Reserve intends to communicate and make policy decisions going forward.

The Statement: Evolution, Not Revolution

The July policy statement contained relatively few changes from June’s statement, signaling that policymakers see little reason to materially alter their assessment of the economy.

Rather than offering stronger forward guidance, the Committee largely reaffirmed its existing view of economic conditions while emphasizing that future policy decisions will continue to depend on incoming data.

The restrained statement itself became part of the message: this Fed appears increasingly comfortable saying less about where policy is headed and allowing the economic data to dictate future decisions. That theme was carried directly into Chair Warsh’s press conference.

A Different Leadership Style

Perhaps the defining moment of the afternoon came when Chair Warsh described the discussion inside the Federal Open Market Committee (FOMC) as, “I asked for a good family fight, and I got one.”

The remark was more than a memorable sound bite. It underscored Warsh’s belief that healthy disagreement strengthens the policymaking process rather than undermines it. Later, he offered another phrase that might prove just as memorable: “Watch the ball, not the referee.”

The message was clear — investors should focus on the underlying economic fundamentals — not the personalities, politics, or day-to-day speculation surrounding monetary policy. For Warsh, the Federal Reserve’s responsibility is to evaluate the incoming data objectively and respond appropriately, rather than becoming the story itself.

Together, those two comments captured a leadership style that values rigorous debate, disciplined analysis, and evidence-based decision-making.

Dissent Moves Into the Open

The meeting also reflected a Committee that appears increasingly comfortable expressing differing policy views. Governors Beth Hammack, Neel Kashkari, and Lorie Logan dissented from the decision, in favor of a 0.25% rate hike, underscoring that opinions within the FOMC remain divided over the appropriate near-term path of monetary policy.

Rather than signaling dysfunction, the dissents reinforced Warsh’s broader message that rigorous debate strengthens the policymaking process. His willingness to encourage differing viewpoints suggests that he views independent thinking and open discussion as strengths rather than weaknesses.

While the Committee members may disagree on the appropriate timing and direction of future policy adjustments, Warsh made clear there is no disagreement over the Fed’s ultimate objective: returning inflation to its 2% target.

One Inflation Target

While encouraging debate, Warsh left little room for ambiguity regarding the Federal Reserve’s objective: "There is only one inflation target, and it’s 2%.” Despite continued progress on inflation, he stressed that policymakers remain committed to returning inflation sustainably to target before declaring the job complete.

The message reinforces that the Committee’s long-run objective has not changed, even as its communication style has evolved.

Less Guidance, More Data

A recurring theme throughout the press conference was the Fed’s reduced emphasis on providing explicit guidance about future meetings.

Rather than signaling a predetermined path for interest rates, Warsh repeatedly emphasized that policy would respond to incoming economic data. The implication is straightforward: "Every meeting remains live, policy is not on autopilot, and the hurdle for changing rates — higher or lower — will depend on how inflation, employment, and broader financial conditions evolve.”

Economic Resilience and Long-Term Growth

Warsh characterized the U.S. economy as remaining fundamentally resilient, even as growth moderates from earlier strength. He also highlighted the potential for artificial intelligence and technological innovation to improve productivity over time, suggesting that stronger productivity growth could ultimately support higher long-run economic growth while helping ease inflationary pressures.

Market Reaction

Markets interpreted the combination of the FOMC decision and Chair Warsh’s press conference as more hawkish than the policy alone suggested. Stocks declined sharply and Treasury yields rose as investors priced in the possibility that interest rates could remain higher for longer. Although the Committee left rates unchanged, Warsh underscored that inflation remains above target, declined to signal the next policy move, and reiterated that the Fed will respond to the data not market expectations. The market’s reaction reflected assessment of the path of monetary policy rather than the disappointment with today’s decision.

What This Means for Investors

The July FOMC meeting did little to change the Fed’s destination, but it reinforced that the journey remains uncertain. Inflation is still above target, the economy continues to show resilience, and the Committee is unwilling to commit to a predetermined policy path. That combination is likely to keep both bond and equity markets sensitive to incoming economic data over the coming months.

Rather than attempting to anticipate every shift in Fed expectations, investors should remain focused on the underlying fundamentals. As Warsh reminded markets: “Watch the ball, not the referee.” The data – not the headlines – will determine the next move, and as a result, maintaining a disciplined, long-term investment approach remains the best response to an environment where policy uncertainty is likely to persist.

Key Takeaways

Tensions in the Middle East are intensifying as the potential rises for re-escalation and a widening conflict.

The conflict in the Middle East intensified last week with both the U.S. and Iran striking each other. Tensions also spread last week as the Houthis, an Iran-backed rebel group in Yemen, threatened to blockade the Bab-al-Mandeb Strait, potentially restraining access to the Red Sea. More than eight million barrels of oil pass through the Strait each day. These two events led oil prices to spike back above $100 per barrel.

Tensions are also seemingly rising further east between China and Taiwan. While the U.S. economy has shown great resilience during the conflict with Iran, a conflict in Taiwan would likely have much larger ramifications. The trade share of global GDP from semiconductors, of which Taiwan is a major supplier, is now larger than oil. Additionally, the U.S. imports more artificial intelligence (AI) related-equipment from Taiwan than from any other country, meaning that if supply is disrupted, the U.S. economy would quickly feel the effect.

Tariffs are back, but less hawkish than feared.

President Trump announced new tariffs last week using Section 301 of the Trade Act of 1974. The new tariffs were implemented just as the previous tariffs, brought under Section 122 of the same Trade Act, were set to expire. The tariff rate for the majority of countries did not change, remaining at approximately 10%. A few large trading partners, including China, saw their rate increase to 12.5%. The daily statutory tariff rate rose by less than one percentage point and is still well below the level seen in the immediate aftermath of “Liberation Day.”

Second quarter earnings season continues to outperform already high expectations.

Coming into the second quarter, analysts were expecting earnings for the S&P 500 to grow more than 23% in the quarter. The expectation has now risen to approximately 38%, which would be the largest quarterly growth rate since the rebound from the pandemic.

Alphabet is a major reason for the jump in earnings expectations, as their earnings per share (EPS) nearly doubled due to investments in SpaceX and Anthropic, resulting in net unrealized gains of $98 billion. However, even if you remove Alphabet, earnings for the S&P 500 are still expected to grow 26%.

On the AI front, approximately 10 months ago, we noted that AI spending had entered a riskier phase; recently, it’s only gotten riskier. Hyperscalers continue their capital expenditure spending, but they are increasingly funding it with debt (and now equity issuance) rather than from cash flow.

Bottom Line – how to invest now.

We expect volatility to remain elevated, and we continue to advocate for robust diversification. Bonds may continue to struggle to add ample diversification amidst an environment of larger federal deficits and higher interest rates. Bonds may show higher correlations with stocks in such an environment, leading to less portfolio diversification. To gain the desired diversification in a portfolio, we continue to emphasize the use of New Tools where appropriate. We also note that international markets may also provide additional diversifying qualities and believe opportunities exist beyond large cap growth equities.

Even before the Iran War, we held the view that inflation could be persistent (due to rising nationalism along with other forces). The Iran crisis adds a material new source of risk, and although we don’t see history repeating itself in lock-step with the 1970s, investors may want to maintain allocations to real assets after the conflict ends.

In sum, real investors need real assets, and U.S. investors need exposure beyond U.S. financial assets and concentrated indexes.

Equity Takeaways:

Stocks were positive in early Monday trading. The S&P 500 rose approximately 0.7%, to 7464, while the tech-heavy Nasdaq rose approximately 1.0%. Small caps were up 0.5% and non-U.S. stocks were also up.

The S&P 500 fell approximately 1.6% last week despite continued strong earnings releases. Year-to-date, the large-cap index is up 9.0%. Due to the fact that the “Magnificent 7” stocks make up more than 40% of the S&P 500, the Index’s returns will be highly dependent on those seven stocks, which have struggled in recent weeks due to concerns around increased AI spending.

With midterm elections less than 100 days away, stocks are likely to see muted returns during the lead up to election day as potential policy changes push investors into a stalling pattern. After election day has passed, markets historically see a strong rebound as uncertainty clears.

Fixed-Income Takeaways:

Yields rose across the curve last week, with short-term yields rising more than long-term yields. Specifically, at the short end, 2-year yields moved 12 basis points (bps) higher, closing the week at 4.33%; longer out on the yield curve, 10-year yields moved 9 bps higher to close the week at 4.68%, while 30-year yields moved 5 bps higher to close the week at 5.16%. 

The rise in yields likely occurred due to rising inflation concerns as tensions rose in the Middle East. Rising inflation expectations changed the outlook for the Federal Reserve’s Federal Open Market Committee (FOMC) meeting later this week. Coming into last week, market participants did not expect any changes to the federal funds rate. Coming into this week, market participants are now pricing in a 1-in-3 chance that the Committee will increase interest rates. It is highly unusual for investors to be this uncertain about a FOMC meeting outcome this close to the meeting date.

In early Monday trading, yields were lower: 2-year Treasury yields were trading at 4.32%, 5-year Treasury yields at 4.41%, 10-year Treasury yields at 4.65%, and 30-year Treasury yields at 5.13%.

Investment grade credit spreads widened slightly last week, ending the week at 79 bps. High-yield spreads saw a more significant rise, widening 14 bps to end the week at 280 bps, which is still well below its long-term average of 450 bps. 

Investment grade issuance continued its record pace, with July new issuance reaching estimates of $112 billion, an increase of 30% from last July. Year-to-date, there has been $1.2 trillion of new issuance, on pace for more than $2 trillion this year.

Key Takeaways

Inflation cooled in June, but it may be short-lived as the re-escalation between the U.S. and Iran threatens to drive up energy prices again. 

The June Consumer Price Index (CPI) was released last week. Headline month-over-month inflation fell 0.4%, its largest monthly decline since 2020; year-over-year inflation slowed to 3.5%, down from 4.2% in May. The decline was almost entirely attributed to the fall in energy prices during the month, thanks in part to the Memorandum of Understanding between the U.S. and Iran, which reopened the Strait of Hormuz to commercial vessels. 

This drop in energy inflation looks likely to reverse in July as the re-escalation in fighting has essentially shut the Strait once again. Despite the rising tensions, the better-than-expected CPI report reduced the chance of an interest rate increase at the July Federal Open Market Committee (FOMC) meeting. 

Earnings season kicked off with a strong start.

Second quarter earnings season kicked off last week with the big banks. Coming into the quarter, analysts were expecting strong results, forecasting year-over-year earnings growth of 23.2%. That number has already been revised higher to 24.7%, with just 10% of the S&P 500 having reported. The change in full-year forecasts has been even more substantial, rising from 14.9% at the start of the year to 24.5% now. While this strong performance has helped drive stock prices higher, it’s important to remember that, historically, stock prices move before earnings do. 

Beyond earnings, market participants will also be scrutinizing the capital expenditures (CapEx) portion of company reports due to the monumental spending on the artificial intelligence (AI) buildout. Coming into 2026, hyperscalers were expected to grow their CapEx by approximately 40% year-over-year; that number has now jumped to just less than 80%. This increased spending has led to many hyperscalers turning to the debt markets and issuing more equity shares, raising the riskiness of the AI trade. 

The AI “war” intensifies.

Chinese AI company Moonshot released its K3 model last week. Based on “model intelligence,” the model is a viable contender versus the models of U.S. hyperscalers. The K3 model will be offered as fully open-source software, meaning anyone will be able to download it and develop their own use cases. It is also important to call out that K3 was produced with cheaper, less powerful semiconductors due to the U.S. export ban on cutting-edge chips, making it cheaper to run. 

We believe the introduction of cheaper AI models creates three possible investment scenarios. In our Bear case, as cheaper open-source models continue to narrow the quality gap, frontier AI vendors will be forced to lower prices before revenue scales enough to absorb the CapEx spent on the AI buildout. In our Base case, the cheaper use models will be seen as value models that will be used for more routine tasks, while the more expensive premium models will be used for high-stakes workflows, creating market segmentation. In our Bull case, the lower cost per task made available by the cheaper models will unlock new use cases and raise the aggregate compute demand even as unit prices fall.

Bottom Line – how to invest now.

We expect volatility to remain elevated, and we continue to advocate for robust diversification. Bonds may continue to struggle to add ample diversification amidst an environment of larger federal deficits and higher interest rates. Bonds may show higher correlations with stocks in such an environment, leading to less portfolio diversification. To gain the desired diversification in a portfolio, we continue to emphasize the use of New Tools where appropriate. We also note that international markets may also provide additional diversifying qualities and believe opportunities exist beyond large cap growth equities.

Even before the Iran War, we held the view that inflation could be persistent (due to rising nationalism along with other forces). The Iran crisis adds a material new source of risk, and although we don’t see history repeating itself in lock-step with the 1970s, investors may want to maintain allocations to real assets after the conflict ends.

In sum, real investors need real assets, and U.S. investors need exposure beyond U.S. financial assets and concentrated indexes.

Equity Takeaways:

Stocks were mixed in early Monday trading. The S&P 500 rose approximately 0.4%, to 7489, while the tech-heavy Nasdaq rose approximately 1.0%. Small caps were up 0.2%, and non-U.S. stocks were mixed.

The S&P 500 fell approximately 1.0% last week despite strong earnings releases. Year-to-date, the large-cap index is up 9.6%. The equity market has started to experience a rotation away from the momentum factor, driven primarily by lingering doubts about the resiliency of the AI boom. In place of momentum, we are starting to see a potential rotation into minimum volatility as investors look for more defensive sectors. Dividend stocks are also an area that provides the lower volatility and defensive positioning that some investors seek.

International emerging markets have experienced a sharp reversal in recent weeks, almost entirely due to the pullback in semiconductors. Due to the hyperbolic rise of some chip manufacturers earlier in the year, Taiwan and South Korea surpassed China and India as the largest country weights in the MSCI Emerging Markets Index. This left the Index significantly less diversified than other indices, leading to the sharp pullback we have seen recently.

Fixed Income Takeaways:

Yields fell across the curve last week, with short-term yields falling more than long-term yields. Specifically, at the short end, 2-year yields moved 9 basis points (bps) lower, closing the week at 4.18%; longer out on the yield curve, 10-year yields moved 7 bps lower to close the week at 4.55%, while 30-year yields moved 4 bps lower to close the week at 5.07%.

The drop in yields likely occurred due to the CPI and PPI reports that showed inflation slowed by more than expected. On the day CPI was released, the 2-year yield fell 14 bps, the largest single day decline since February 2026. The favorable inflation reports almost entirely removed the possibility of a rate hike at the July FOMC meeting. Market participants now expect the first rate hike to take place at the October meeting.

In early Monday trading, yields were higher: 2-year Treasury yields were trading at 4.20%, 5-year Treasury yields at 4.30%, 10-year Treasury yields at 4.56%, and 30-year Treasury yields at 5.08%.

Investment grade credit spreads were flat last week, primarily due to increased supply in the market. Investment grade issuance was approximately $50 billion for the week, led by large deals by the biggest banks. Hyperscaler bonds were a noticeable drag last week; they are now the worst performer in the investment grade index year-to-date.

Key Takeaways

The redesign of the Federal Reserve (Fed) has commenced, but investors will not know its implications for some time due to elevated inflation.

The Fed is back in the spotlight this week, with Kevin Warsh scheduled to testify in front of Congress for the first time as Chairman of the Federal Reserve. Coming into the year, it was expected the Fed would continue to lower interest rates, but that has quickly reversed with market participants now expecting an interest rate increase. Long-term yields have also risen due to stickier inflation and are sitting near their 25-year high. Due to these changes, we believe it is important to stay neutral to duration and not assume incremental interest rate risk.

Additionally, the old investment paradigm has seemingly changed. Previously, when the economy experienced a downturn, yields would fall and bond prices would rise, acting as a shock absorber for portfolios. However, with the economic shocks now causing inflation, yields are rising, and bond prices are falling, limiting the diversification benefits of bonds. To achieve greater diversification, therefore, we continue to emphasize the use of New Tools where appropriate.

Oil has returned as a key market narrative, and the future of the Strait of Hormuz is again unclear.

The conflict between the U.S. and Iran has reignited as the Memorandum of Understanding has seemingly broken down. This has led to a slowdown in the number of commercial vessels passing through the Strait of Hormuz, putting upward pressure on global oil prices. The U.S. remains in a relatively advantageous position given it is a net-exporter of oil; however, reserves are quickly dwindling. With the war potentially dragging on, oil could see another increase. With this in mind, we believe it is important to maintain exposure to real assets given heightened geopolitical concerns.

Artificial intelligence (AI) remains the major market narrative.

AI has essentially become the economy, the stock market, and, increasingly, the bond market. All three will be influenced by how the AI narrative evolves. The investment in the AI buildout continues as spending on information processing equipment is growing by more than 60% year-over-year. However, the cost of the buildout is quickly depleting the free cash flow of the hyperscalers, causing investor concern. The fall in free cash flow has also led to hyperscalers turning to debt to finance the buildout, which has steadily driven their credit spreads higher and increased the risk of the AI investment story. Forecasters believe this drop in free cash flow will recover, or even surge higher, by 2028 thanks in part to continued AI adoption. According to a recent survey by Ramp, AI adoption has grown across companies of all sizes, and AI spending has continued to expand despite being concentrated in the largest firms. For these reasons, we believe investors should stay neutral to risk and emphasize AI adopters and long-term AI beneficiaries.

Bottom Line – how to invest now.

We expect volatility to remain elevated, and we continue to advocate for robust diversification. Bonds may continue to struggle to add ample diversification amidst an environment of larger federal deficits and higher interest rates. Bonds may show higher correlations with stocks in such an environment, leading to less portfolio diversification.

Even before the Iran War, we held the view that inflation could be persistent (due to rising nationalism along with other forces). The Iran crisis adds a material new source of risk, and although we don’t see history repeating itself in lock-step with the 1970s, investors may want to maintain allocations to real assets after the conflict ends.

Another argument for diversification: the S&P 500 index has become much more concentrated. In 2006, the S&P 500 had approximately 35% exposure to growth stocks, 39% blend, and 26% value, according to data from Bank of America (BofA). In 2026, the S&P 500 holds 46% growth stocks, 42% blend, and only 11% value stocks, according to BofA. We also note that international markets may also provide additional diversifying qualities and believe opportunities exist beyond large cap growth equities.

In sum, real investors need real assets, and U.S. investors need exposure beyond U.S. financial assets and concentrated indexes.

Equity Takeaways:

Stocks were mixed in early Monday trading. The S&P 500 fell approximately 0.4%, to 7548, while the tech-heavy Nasdaq fell approximately 1.2%. Small caps were little changed, and non-U.S. stocks were mixed.

The S&P 500 resumed its uptrend last week, finishing the week up by approximately 1.2%. Year-to-date, the large-cap index is up 11.3%. Performance has continued to broaden out over recent months. Since the beginning of June, the cap-weighted S&P 500 has been flat, while the equal-weight Index has grown by more than 4%. Additionally, the S&P Small Cap 600 Index has reached a new high multiple times over recent months, further highlighting the broadening of market performance.

Fixed-Income Takeaways:

Yields rose across the curve last week, with long-term yields rising more than short-term yields. Specifically, at the short end, 2-year yields moved 7 basis points (bps) higher, closing the week at 4.21%; longer out on the yield curve, 10-year yields moved 8 bps higher to close the week at 4.56%, while 30-year yields moved 7 bps higher to close the week at 5.06%.

The rise in yields was likely due to the resumption of hostilities between the U.S. and Iran, putting upward pressure on energy markets. Real yields (which remove the impact of inflation) have also continued to rise, with the 30-year real yield reaching its highest level since 2008. Despite the rising yields, bond proxies have not reacted negatively for the most part. REITs, Dividend stocks and Value stocks have held up, while gold has fallen due to rising rates and a strengthening dollar.

In early Monday trading, yields were higher: 2-year Treasury yields were trading at 4.23%, 5-year Treasury yields at 4.33%, 10-year Treasury yields at 4.58%, and 30-year Treasury yields at 5.08%.

Investment grade and high yield credit spreads rose modestly last week. Junk bond spreads continued to tighten, reaching their tightest level since 2007. Treasury auctions last week experienced strong demand as investors try to lock in the higher yields currently available.