Global bond yields have continued to climb, with the US 10-year and 30-year Treasury yields both rising to their highest levels since 2002 last week.

According to an analysis by Zhou Huantong, Global Market Strategist at JPMorgan Asset Management, if the Federal Reserve raises rates no more than four times within 12 months, it would still constitute a mild rate hike cycle. She expects strong growth momentum for US companies, which should help offset the negative impact of rising bond yields.

Zhou Huantong pointed out that stock markets tend to perform well 6 to 12 months after the first rate hike. Combined with current strong US economic growth momentum and corporate earnings, along with artificial intelligence (AI) as a positive catalyst, this provides a significant boost to growth stocks, which are more sensitive to rate changes, and is expected to continue supporting stock market performance.

However, she also acknowledged that the dividend yield gap for the S&P 500 Index has risen to a high level, and the relative valuation between stocks and bonds now favors bonds. This is expected to attract capital inflows into the bond market, and investors may want to re-examine their investment allocations.

Hong Kong stocks last week were not affected by the shadow of high external bond yields, gaining 239 points or 1% for the full week. Zhou Huantong stated that market rumors of mainland China recently tightening cross-border tax and wealth regulation could pose short-term headwinds for A-share and H-share markets, and she leans toward a cautious view on Hong Kong stocks for the fourth quarter.