If you have been watching the US stock market over the past week, you may have noticed something that feels a bit off. The S&P 500, which set fresh record highs only days ago, has now fallen for three trading days in a row, closing at 7,353.61 on Tuesday.
The Dow Jones slipped back below 50 000, and even the technology-heavy Nasdaq joined the slide. There has been no corporate scandal, no bank failure, and no surprise recession headline. So what is going on? In one phrase: bond yields.
This week, the yield on the US 10-year treasury bond climbed to its highest level in a year, around 4.66%. The twenty-year and 30-year yields are now at levels not seen in nearly two decades. For many Zimbabwean readers, those numbers may sound like background noise that only matters to Wall Street traders. They actually matter to anyone who holds US shares through a brokerage account, anyone planning to invest in the US, and anyone whose income or savings depend on the US dollar.
When the United States government needs to borrow money, it issues IOUs called Treasury bonds. The yield is simply the annual interest the buyer of that bond will earn. When yields rise, it means lenders are demanding a higher return to lend to Washington. This usually happens for one or more of three reasons: investors are worried about inflation, they are worried about the size of government debt, or they expect the central bank to keep interest rates high for longer than expected.
Right now, all three concerns are in the air. Oil prices have climbed about six percent in a week on the back of tensions between the United States and Iran. Recent US retail sales numbers came in stronger than expected, which means consumers are still spending and prices may take longer to cool. And the Trump administration’s tariff and tax decisions have markets second-guessing the inflation outlook.
Why this hurts share prices
First, bonds become a more attractive alternative. If a safe US Treasury pays almost five percent a year, with the full backing of the US government, then a risky technology stock must offer a much better expected return to be worth owning. Some investors quietly shift money out of shares and into bonds, which means fewer buyers in the stock market and softer prices.
Second, future profits are worth less today. The price of a share is essentially today’s value of all the cash a company is expected to generate in the years ahead. When interest rates and yields rise, future cash gets discounted more heavily. In plain English, a dollar earned five years from now is worth less today than it was when rates were lower.
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This is why fast-growing technology and artificial intelligence companies, whose biggest earnings still lie far in the future, tend to fall hardest when yields jump. Nvidia, Intel, AMD, and Micron all dropped between four and seven percent last Friday for exactly this reason.
Third, borrowing becomes more expensive. Firms use debt to expand factories, fund acquisitions, and buy back their own shares. When that debt costs more, profit margins get squeezed and management teams become more cautious.
Households feel the same pinch through higher mortgage and car loan rates, which slowly cools consumer spending and eventually feeds back into weaker company earnings.
What this means for the diaspora investor
If you hold US-listed shares, there is no need to panic, but there are useful habits to adopt. Pay attention to the ten-year Treasury yield the same way you pay attention to share prices. It is the closest thing the global market has to a master switch. When it moves sharply, everything from your portfolio to mortgage rates to the behaviour of the rand and the Zimbabwe dollar against the greenback will feel it.
Check whether the companies you own actually produce profits today, or whether their value depends on cash flows that may only arrive in 2030. Both can be sensible investments, but they behave very differently when yields rise.
Finally, keep some cash on the side. Pullbacks like the one we are watching often hand patient investors entry points into quality companies at better prices.
*Isaac Jonas is the founder and principal consultant of Streetwise Economics, an applied economics consulting practice based in Abbotsford, British Columbia, Canada. His work focuses on regional economic analysis, labour market intelligence, and capital market commentary, with clients across Canada and Zimbabwe. He holds a Master of Food and Resource Economics and an MA in Resource, Environment and Sustainability from the University of British Columbia, and a BSc Economics from the University of Zimbabwe, where he was a Mastercard Foundation Scholar.
Website: streetwiseeconomics.com · YouTube and Substack: Streetwise Economics
Follow Streetwise Economics on YouTube and Substack for more applied analysis. I am also available on social media — and always happy to discuss these ideas further or to take on commissioned research, applied economic analysis, labour market reports, and policy advisory work for institutional and corporate clients. Nothing in this article should be taken as investment advice. Always consult a licensed advisor and do your own due diligence before investing your money. Investing comes with risks
