Us Treasury yields have risen again, and US stock market stress tests are underway: Will the next round of opportunities lie in AI, gold or cash flow?

U.S. Treasury yields surge again, U.S. stocks face a stress test — where exactly is the next opportunity?

Friends, do you know? The most dangerous signal in U.S. stocks right now isn’t in the stock market — it’s in Treasuries. The 10-year U.S. Treasury yield once surged above 4.6%, and the 30-year Treasury also came close to 5.2%. That is basically telling the market: you can just sit on cash and buy bonds for a high return, so why should you still chase overvalued tech stocks? The question is, can Nvidia, Tesla, and the Nasdaq still withstand this stress test? Where exactly is the next opportunity — AI, gold, or cash-flow companies? First, like and subscribe to the channel, and let’s cut straight to the key points.

Let’s first look at the market action on May 22 — it’s really interesting. On the surface, the market looks like nothing happened. The Dow Jones Industrial Average rose 0.6%, closing around 50,579, setting a new all-time closing high. The S&P 500 rose 0.4% and has now risen for eight straight weeks. The Nasdaq also edged up 0.2%. The Russell 2000 performed even stronger, rising nearly 0.9%. If you only look at the indexes, you’d think U.S. stocks are doing pretty well — where’s the pressure? Maybe the pressure is all in my account.

But if you look closely, you’ll find a very strong contrast here.

Stocks are rising, but the bond market is also reminding everyone not to get too happy. The 10-year Treasury yield is still around 4.56%, the 2-year Treasury is above 4.1%, and this week the 30-year Treasury even jumped to 5.201% at one point — a very eye-catching number. Why is it eye-catching? Because the 30-year Treasury is the anchor for long-term funding costs. It affects mortgages, corporate long-term financing, the government’s borrowing costs, and also that most ruthless number in stock valuation models: the discount rate.

Simply put, the essence of a stock price is buying future cash flows. How much is money you’ll earn in the future worth today? It has to be discounted. The higher the interest rate, the heavier the discount. Money you might earn over the next ten years was once given a very high valuation by the market, but when rates move up, the market immediately changes its tone — meaning, the future is nice, but today I’m cutting it first.

That’s why in a high-yield environment, growth stocks face the most pressure.

Especially AI stocks. What’s most attractive about AI companies right now is the growth they may deliver over many years. Data centers need to be built, GPUs need to be bought, servers need to be stacked, power capacity needs to expand, optical communications need upgrades, and memory plus advanced packaging have to keep up. That story is real, and it’s a big one. But the problem is, AI doesn’t grow out of thin air — it needs money, and a lot of it.

When the 10-year Treasury yield is above 4.5% and the 30-year Treasury is nearing 5%, corporate financing costs are no small matter. Cloud providers have to keep spending on data centers, utilities have to expand infrastructure, smaller companies have to issue debt to finance operations, and data center REITs have to roll over debt — none of that can escape interest rates. Interest rates are like a highway toll booth: the more traffic, the more painful the toll.

So you’ll see a very interesting phenomenon: the market still believes in AI, but it has started to become picky.

Not every AI stock can rise. Companies with real cash flow, pricing power, orders, and profits are still the ones the market is willing to give a chance. For example, an AI leader like Nvidia — although volatility has increased, because profits and revenue are still growing explosively, the market is still willing to assign it a relatively high valuation. But those companies that only know how to talk about the AI concept, with weak revenue, weak cash flow, and a need for financing just to stay alive, will turn from hot favorites into hot potatoes if U.S. Treasury yields keep rising.

That’s the first layer of logic: high yields don’t directly kill U.S. stocks, but they force the market to re-screen assets.

In the past, as long as you said you were related to AI, the market would applaud first and ask later what you actually sold. Now, if you say you’re an AI company, the market will ask: are you making money? What’s your gross margin? Are orders locked in? Who are your customers? Who pays for the capex? When does the debt mature? Wall Street changes its face faster than flipping a book — yesterday it was calling you sweetheart, today it’s asking about your balance sheet.

The second layer of logic is that Treasury yields are changing the relative attractiveness of market capital.

A lot of people think stocks rise because everyone is optimistic, but the deeper reason is that money always has to find somewhere to stay. In the past, when Treasury yields were low and cash returns were weak, investors had no choice but to go into stocks to chase returns. So growth stocks could rise, tech stocks could rise, and small caps could rise too. Even if valuations were a bit expensive, the market would say, there’s nothing better to buy out there.

But now it’s different. Once Treasury yields get above 4.5%, and especially when long-duration bonds approach 5%, investors suddenly have more options. For pension funds, insurance companies, and large asset managers, getting a relatively stable 4% to 5% return is already very attractive. They don’t necessarily have to follow you into a growth stock trading at dozens of times sales with profits still on the way. The higher Treasury yields go, the lower the ceiling on stock valuations.

The third layer of logic is that consumers are being squeezed from both interest rates and inflation.

In May, the University of Michigan consumer sentiment index fell to around 44.8, one-year inflation expectations rose to 4.8%, and long-term inflation expectations rose to 3.9%. This data is crucial because it tells us that ordinary Americans do not feel at ease about future prices. Gas is expensive, mortgages are expensive, credit card rates are high, car loans aren’t cheap, and everyday living costs are still squeezing wallets.

What does this mean for U.S. stocks? It means consumer stocks can’t just be judged by revenue — you also have to see whether consumers can still keep swiping their cards. The strongest foundation of the U.S. economy over the past few years has been that consumers can spend, dare to spend, and are willing to borrow to spend. But now the question is: if credit card rates are high, mortgages are high, gas is high, and wage growth can’t keep up with inflation expectations, then consumers will eventually shift from spending freely to counting every dollar.

So the differentiation among retail stocks will become more and more obvious. If you agree with my analysis, give it a like, subscribe to the channel, and share your thoughts in the comments.

Truly cheap, necessity-driven, discount-oriented companies may still hold up. Because tighter wallets don’t mean people stop buying things — they just move from expensive places to cheaper ones. Retailers like TJX, for example, are more likely to get the market’s favor. But companies that rely on mid-to-high-end discretionary spending, on consumer sentiment, and on low-interest-rate conditions to support valuations will face much greater pressure.

In other words, in a high-yield environment, consumers also become “value investors.” In the past, people bought based on mood; now they buy based on discounts. Before, it was: if I like it, I buy it. Now it’s: I like it, but let me wait and see if there’s a coupon.

There’s another piece that’s very easy to overlook: fiscal pressure is being repriced by the market.

Many people look at Treasury yields and only look at the Fed, which isn’t enough. Now that long-end Treasury yields are rising, besides inflation, there’s also a very real issue: the U.S. government has borrowed too much. With a large debt load, high fiscal deficits, and ever-heavier interest expenses, the market naturally asks: if I lend you money for 30 years, shouldn’t you pay me a bit more interest?

This doesn’t mean the U.S. is about to have a problem — it means bond investors are raising their demands. In the past, global funds thought Treasuries were the safest asset and bought them with their eyes closed. Now people still think Treasuries are safe, but that doesn’t mean they’re willing to buy them at very low yields. Safe is safe, but the price has to be right. It’s like a house in a great location: if the asking price is too high, buyers will still say, buddy, calm down.

That’s also why it’s especially important that the 30-year Treasury breaks above around 5%. It represents the market rethinking long-term inflation, long-term fiscal conditions, and long-term supply pressures. The 30-year isn’t a toy for short-term speculators — it’s more like a vote by global capital on the U.S.’s long-term credit and long-term interest-rate environment.

By now, friends may be wondering: what exactly does this mean for U.S. stocks? Give it a like, subscribe to the channel, and let’s keep going.

The first thing hit is high-valuation tech stocks. That doesn’t mean they’re all doomed, but the market will care much more about actual earnings delivery. Companies like Nvidia, Microsoft, Amazon, Google, and Meta won’t be completely abandoned just because rates are high, because they have cash flow, moats, and a place in AI infrastructure. But if valuations are going to move higher, they must be backed by stronger performance, not just sentiment. In other words, tech stocks aren’t unable to rise from here — they just can’t rely on a single line like “AI is changing the world.” You need to show orders, margins, free cash flow, and return on capital spending.

Next, the logic for bank stocks becomes more complicated. On the surface, high rates are good for net interest margins, but if yields rise too fast, bond asset prices fall, loan demand weakens, and credit risk rises, banks will also be stressed. Banks like moderate high rates; they don’t like rates bouncing up and down like a bungee jump. Large banks may be more resilient than regional banks because their funding sources are more stable and their assets are more diversified. Regional banks, if they have large exposures to commercial real estate and long-duration bonds, need to be especially careful.

Finally, gold and short-term Treasuries will continue to serve as safe havens for some capital. Not because they’re guaranteed to skyrocket, but because when market volatility rises, money looks for defensive positions. The advantage of short-term Treasuries is that duration is short, interest-rate risk is relatively small, and you can still earn a relatively high yield. Gold’s logic comes more from inflation expectations, geopolitical risk, and fiscal concerns. In other words, when the market starts worrying that paper wealth isn’t stable, gold comes out to show its presence, like that friend who doesn’t talk much normally but is very useful when it matters.

So ordinary investors going forward can’t just ask whether a company has a hot theme — they need to ask three more realistic questions. Give it a like, subscribe to the channel, and let’s keep going.

First, how much debt pressure does it have? Second, is its cash flow strong enough? Third, if Treasury yields stay above 4.5%, can its valuation still hold up?

These three questions are a lot more reliable than asking a friend whether this stock can double. Because in a high-interest-rate environment, there are plenty of doubling stories, but not that many companies that survive.

There are three key things I think the market should watch next.

First, whether the 10-year Treasury can move back below 4.3%. If the 10-year yield clearly falls, growth stock valuation pressure will ease, the Nasdaq and the AI chain will feel more comfortable, and small caps will also have a better basis for rebounding. But if the 10-year keeps hovering around 4.6% to 4.8%, or even pushes toward 5% again, then market valuations will continue to be compressed, and high-valuation tech stocks in particular will be more easily punished for even minor earnings misses.

Second, whether the 30-year Treasury can stabilize. Once the 30-year stays above 5% for a long time, it’s no longer just a stock market issue — mortgages, fiscal conditions, and long-term corporate investment will all be affected. It’s a thermometer for the long-cycle U.S. economy. If this thermometer keeps showing a fever, then even if the market takes some antipyretics in the short term, it’s hard to truly feel at ease.

Third, whether inflation expectations keep rising. What the Fed fears most is not oil prices rising for one day, but people beginning to believe that prices will keep rising in the future. Once inflation expectations get out of control, rate cuts become very difficult. The stock market’s favorite script is a soft landing, inflation coming down, and moderate rate cuts. If it instead becomes slowing growth plus rising inflation expectations, that’s not a soft landing — that’s like the plane suddenly hitting turbulence just before touchdown, and even the flight attendants are starting to sit down and buckle up.

So the conclusion of this episode is very clear.

U.S. Treasury yields have once again become the number-one pressure point for U.S. stocks, not because stocks are necessarily about to plunge immediately, but because they are changing the market’s valuation logic, capital flows, and sector rankings. In the past, the market was willing to pay for the future; now it wants to see profits right now. In the past, the bigger the story, the higher the valuation. Now, the story can still be big, but the cash flow has to be even bigger.

For ordinary investors, my advice is not to panic-sell everything, and not to charge in blindly either. Instead, switch your investment framework from “chasing themes” to “watching rates.” If yields continue to run high, focus first on companies with strong earnings visibility, healthy cash flow, low debt pressure, and pricing power. For pure concept stocks, highly leveraged stocks, far-future profit stories, and financing-dependent names, lower your expectations and don’t treat every rebound as the start of a new bull market.

If you’re a tech investor, keep an eye on two things: can earnings continue to beat expectations, and have valuations been compressed again by interest rates? If you’re a small-cap investor, keep an eye on financing costs and earnings recovery. If you’re more defensive, short-term Treasuries, cash-flow assets, some gold, and high-quality dividend stocks may be better suited to the current environment than simply chasing momentum.

In summary, U.S. stocks still have opportunities, but the opportunities no longer belong to people who only know how to listen to stories — they belong to people who understand interest rates, cash flow, and valuation repricing. When Treasury yields rise, Wall Street switches from romance mode to math mode. In math mode, stories need a discount, bubbles need to slim down, and only companies that truly make money are qualified to stay at the table.