10Y Hits 5.23%. Does That Mean $SPY Is About to Crash?
The 10Y just hit 5.23%, its highest level since June 2007.
The immediate reaction is obvious:
๐ Higher yields
๐ Higher discount rates
๐ โ $SPDR S&P 500 ETF Trust(SPY)$ crash incomingโ
But history tells a more nuanced story.
Since 1953, the 10Y has broken above 5% nine times.
Over the following 12 months:
๐ Average $SPY return: +2%
๐ Normal 12-month return: +9%
๐ป 4 of 9 periods were negative
๐ Average worst drawdown: -10%
That's not a comfortable setup.
But it also doesn't automatically equal a crash.
The bigger question is why yields are rising.
๐ฅ 1๏ธโฃ AI earnings boom
Hyperscalers are spending hundreds of billions on AI infrastructure.
If that spending continues translating into real earnings growth, stocks don't need multiple expansion alone to keep moving higher.
๐ผ 2๏ธโฃ Strong growth + labor market
Rising yields caused by stronger economic growth are very different from rising yields caused by inflation during a recession.
If earnings are rising alongside yields, equities have another source of support.
๐ฆ 3๏ธโฃ Fed policy matters
A Fed that tightens early to contain inflation can create a different environment from one forced to aggressively tighten after inflation becomes entrenched.
History also shows that equities can rise during hiking cycles. The 2004โ06 period is one example, while the 1990s bull market operated with the 10Y frequently around 6โ7%.
๐ฏ So the real signal isn't simply:
10Y > 5% = crash
It's:
10Y rising + earnings rising + economy holding up = a very different setup.
That leaves room for $SPY to grind higher even if the 10Y eventually reaches 6%.
The path could still be messy: more volatility, more shakeouts, and deeper pullbacks.
But 5% on the 10Y alone doesn't write the ending. ๐
Markets are always moving - and sometimes, the best move is knowing what works for you.
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