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US Stocks Can Handle 5.3% Treasury Yield, But Investors Need to Get Selective: Drew Pettit
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CNBC TV18•29-09-2026, 09:56
US Stocks Can Handle 5.3% Treasury Yield, But Investors Need to Get Selective: Drew Pettit
- •Drew Pettit, Chief Investment Strategist at Roundhill Investments, believes US equities can withstand a 10-year Treasury yield of around 5.3%.
- •Strong earnings growth in the S&P 500 and Nasdaq is currently keeping investors in equities despite higher bond yields.
- •Pettit advises investors to become more selective as higher rates pressure cyclicals and small caps.
- •He sees AI as being in its "early innings" with strong demand for compute and infrastructure, preferring to buy AI-related plays on pullbacks.
- •The recent rise in 10-year Treasury yields is primarily driven by the real rate, not inflation expectations, which particularly impacts cyclicals.
Key Questions Answered
Drew Pettit, Chief Investment Strategist at Roundhill Investments, states that US equities can withstand a 10-year Treasury yield of around 5.3% before investors must become much more selective.
Pettit notes that artificial intelligence remains in the "early innings" due to extraordinarily high end-demand for compute and infrastructure, though he expects valuations to experience increased volatility and recommends buying on pullbacks.
Higher real rates put intense downward pressure on cyclical growth and small caps because their long-term earnings expectations have not kept pace, making it necessary for investors to narrow their focus toward high-conviction growth areas.
