Jessica Inskip, director of research at StockBrokers.com, told Full Signal host Phil Rosen that rising bond yields are the biggest risk to stocks, but that how fast yields move matters more than how high they go.
She also said a narrowing, AI-led market does not mean the AI cycle is ending, though it could keep stocks moving sideways until a new catalyst appears.
I sat down with Inskip on Full Signal to talk through why stocks sit near all-time highs while bond yields climb. Here are the main takeaways.
What a narrowing bullish cycle means
Inskip said she tracks trading cycles with the 13-week, 26-week and 40-week moving averages, which she uses to check that prices are rising alongside earnings. A bullish trading cycle, she said, means those averages are acting as support and sloping upward.
The market-cap-weighted S&P 500 is still in that cycle, but its trend is starting to flatten.
The equal-weight index has already broken below its 13-week and 26-week averages, which she described as a neutral zone.
A break of the 40-week average would move it into bearish territory, Inskip said.
She added that the narrowness means the market is propped up by technology, AI and AI-adjacent stocks, which raises headline risk and volatility.
Why bond yields are the biggest risk, and why velocity matters
When we recorded, the 10-year Treasury yield was about 5.2%. Inskip said yields are the market's biggest risk, though not for the reason most headlines suggest.
Reports of the highest yields since 2007 stir memories of the financial crisis, she said, but she sees a normalization.
She said the key shift is from price-agnostic buyers such as central banks to price-sensitive buyers such as large institutions, which creates volatility as yields settle. She pointed to inflation expectations tied to the Iran conflict, fiscal uncertainty after US debt passed $40 trillion, and AI growth prospects as reasons investors want higher yields.
The velocity of the move matters most, Inskip said. If yields spike quickly, that is a problem for stocks, but if they stay elevated and normalize, markets can keep climbing, as they did after earlier moves since the Iran conflict began.
She described stocks and bonds as a "love triangle" competing for investor capital. That shift toward bonds is happening mostly among institutions, she said, not individual investors.
The AI trade and the risk to hyperscalers
Inskip called the AI earnings story "completely compelling" and said leaning into it requires a higher risk tolerance.
She cited a statistic she saw that morning showing technology up 70% from earnings expectations over the past 12 months, versus 4% for staples.
Her concern is that big tech companies have shifted from buying back stock to reinvesting free cash flow, and are now issuing equity and debt to fund the AI buildout. That puts them in competition with Treasuries and corporate bonds for the same pool of institutional capital.
Inskip said that competition puts a ceiling on stocks unless a catalyst justifies the risk. As an example, she said Nvidia's stock had arguably gone sideways despite strong earnings until it announced a buyback.
Meta's Muse and consumer AI adoption
Inskip called the launch of Meta's Muse "a huge master class in marketing." She said it does much of what rival AI assistants do, but with a simple chat box and a friendly face that makes AI feel less intimidating.
She said she likes Meta because it has repeatedly shown it can pivot, but she wants to see consumer adoption show up in earnings and revenue. She suggested watching Google Trends and social trends for early signs.
I told her I have not switched to Muse myself, since I already use several other AI tools. Inskip said power users like us are not the broad consensus.
Apple, cash-secured puts and what she is avoiding
Inskip said Apple is still her stock pick of the year, which she chose in January. I noted the stock was up about 35% since that call.
She cited strong management, Apple's embedded ecosystem and consumer demand for products such as the MacBook Neo and Mac mini. For investors wary of buying at all-time highs, she said she likes selling cash-secured puts, which she said typically collect a 3% to 5% premium.
She noted the trade-offs, including full stock ownership risk and capped upside. She also said she would avoid consumer discretionary stocks because of inflation and a constrained consumer, and she still sees technology as the better corner of the market, while stressing the need for a balanced portfolio.
Listen to the full episode
Tune in to the full conversation with Jessica Inskip on YouTube, Spotify and Apple Podcasts.
For more on the bond market, read why stocks are ignoring bond yields surging to 19-year highs, and subscribe to the free Opening Bell Daily newsletter for a daily briefing on stocks, macro and Wall Street.
Opening Bell Daily is for informational purposes only and is not investment advice. The views expressed are those of the guest, and comments on specific securities and options strategies are not recommendations.