U.S. 10-Year Treasury Yield Re-enters 5%, Market Unease

This supply-demand standoff is significantly impacting the market's direction.

As there have been three instances in the past 25 years where the market saw spasmodic declines each time the 10-year Treasury yield exceeded 5%, investor anxiety is mounting.

If surprisingly strong earnings numbers are released, they could alleviate market concerns from the second quarter, leading to expectations of a large-cap-centric market formation after the earnings announcement.

This is because the Republican Party (Trump's camp) emphasizes AI innovation and development, while the Democratic Party (Obama's focus) supports an AI 'speed war,' creating a fierce competition. Depending on the election results, the pace of AI policy could be adjusted.

This implies that a rate hike is almost certain, with recent CPI and PPI indicators also supporting an environment conducive to rate increases. There are even concerns that the market might react negatively if rates are not raised.

Currently, the dominant analysis suggests that the U.S. economy is not as bad as anticipated. In this situation, former President Trump argues for rate cuts citing recession fears, but this contradicts the current economic situation. The argument that rates are rising because the economy is strong may gain more traction in the market.