The bond market sell-off that’s spooked investors could actually help work off some of the stock market’s excesses, according to investor and CNBC Pro contributor Josh Brown. Brown expects that equities overall will be able to handle the sharp rise in U.S. Treasury yields, which he expects will only hurt the most speculative parts of the stock market. He outlined a scenario that harkened back to 2022, when the rise in interest rates pummeled SPACs, recent IPOs and technology startups that are over-leveraged. “All of a sudden, capital has a cost, and people change their behavior when it actually costs them something to invest,” Brown said on CNBC’s “Halftime Report” on Thursday. “The two-year period leading up to ’22, there was no cost to invest because money was free.” (See Josh’s latest Best Stock analysis here.) “So, what you could end up having is a scenario. … [where] the general stock market rise as rates rise, and you could say, ‘Hey, look, the economy is going to be great. We’re going to get this extended tax cut that’s good enough for everyone else,'” Brown said. “But, it’s going to wreck the most speculative areas in the market that could act as a governor on multiples, even for the [S & P 500].” Small-cap stocks, he noted, are another corner of the market that would get hurt by the rise in yields. Yields tied to longer-dated maturities in the U.S. Treasury market have crossed key psychological thresholds this week. The 30-year U.S. Treasury yield topped 5.14%, its highest level going back to October 2023. The benchmark 10-year Treasury yield is hovering above 4.55%. Investors worry the spike in yields could hinder a stock market that’s rallied following the Trump administration’s announcement of a trade agreement with China, as investors worry about the impact of higher rates on the economy. However, Brown said he expects much of the move higher has already taken place, saying that evidence of a slowing economy later this year will tamp down the rise in yields. “I think the market has to decide which story is more believable, that we’re going to have supply chain shocks as far as the eye can see, or that the labor market is cooling, the economy is decelerating, and inflation is not the real risk,” Brown said. “My personal opinion is the latter. The Fed will be doing more rate cuts than people think today, and I think the economic data is trending that direction. And I can personally look through a 20-year, 30-year north of 5%. For me, that…
Click Here to Read the Full Original Article at Investing…
