Tatiana Darie, macro strategist at Bloomberg, told Full Signal host Phil Rosen that stocks can handle 5% Treasury yields as long as the move is steady, because rate volatility hurts equities more than the level itself.
She called the AI cycle mature rather than early, said she is tactically bullish for now, and highlighted tech, semiconductors, energy and healthcare as places she sees value.
I sat down with Darie on Full Signal to ask why the S&P 500 keeps setting records while the 10-year yield sits above 5%.
Why stocks are shrugging off 5% bond yields
Darie said the S&P 500's price-to-earnings multiple has dropped to a "19 handle," the lowest since late 2023 with brief exceptions like the March sell-off.
In her view, that means a modest Fed hiking cycle is already priced in, because earnings held up while valuations compressed.
"Rate volatility upsets stocks, not the yields itself," she said. When the 10-year yield gaps higher, the discount rate used in valuation models gets less certain, and earnings do not have time to catch up.
I covered the same disconnect in Why stocks are ignoring bond yields surging to 19-year highs.
Energy prices, sticky inflation and the Fed
Darie said she is watching the October FOMC meeting to see how far the Fed intends to go. She does not think conditions justify a full-fledged tightening cycle, and she noted that Fed speakers have pushed back on the idea of back-to-back hikes.
She argued inflation will stay sticky even if crude falls, because refined products like diesel are priced far above crude.
By her math, the market is paying about $190 a barrel for those products, not $90.
She also said this is not a stagflationary environment, pointing to the AI boom and resilient consumer spending. Higher oil prices have boosted S&P 500 earnings more than they have hurt, she said, with energy posting a 9-point margin expansion in the second quarter.
The AI cycle is mature, not early
"We're definitely not early," Darie said of the AI trade. She pointed to analysts expecting AI capex to peak this year, and to AI investment as a share of GDP tracking its dot-com analog, which she read as roughly another year of capex growth.
Her red flag would be a hyperscaler like Meta or Oracle saying it will spend less than expected. Beyond that, she said "earnings is your North Star," and she is watching whether EPS projections and operating margins start to roll over.
"You can call me tactically bullish, long term, a bit cautious," she said, adding that investors need an active approach and should pay attention to every earnings season.
Junk credit is the risk she is watching
Darie flagged CCC bonds and leveraged loans, which she said hit distress levels typically seen in recessions or slowdowns even as the economy is arguably booming. Her concern is whether weak borrowers can still access the market as costs rise.
If many fail at once, she said, "it quickly morphs from a rate risk into a growth risk." She noted that these markets have stabilized a bit, so her advice was to watch them but not worry yet.
Where she sees value: tech, chips, energy and healthcare
On tech, Darie said the sector has fallen the most versus its five-year average valuation and trades at a discount to the market. She said "tech is cheap," and she called it odd that consumer staples trade on par with tech at 21 times forward earnings.
She likes semiconductors as a recovery trade, citing a chip crunch in inventory surveys. On energy, she said earnings growth is above 100% and the sector trades at the lowest multiple in the S&P 500, around 13 times earnings.
She sees healthcare as a diversifier that has lagged the AI trade, with earnings trends improving into 2027.
Tune in to the full conversation with Tatiana Darie on YouTube, Spotify and Apple Podcasts.
For more on how much tech drives the index, read Buying the Entire Stock Market Is Really Just a Narrow Bet on Tech Dominance, and subscribe to the free Opening Bell Daily newsletter for a daily briefing on stocks, macro and Wall Street.