JPMorgan warns of rising bond yields and anticipates a stock market correction of up to 8%.

Grace Peters, head of global investment strategy at JPMorgan, warned that rising bond yields represent one of the biggest risks facing global stock markets, despite the continued positive outlook for US and European stocks.

Peters said in an interview that she expects US and European stocks to continue rising this year, but predicted that markets would see a correction of between 5% and 8% before major events, including the US midterm elections scheduled for November.

She explained that the rise in the yield on 10-year US Treasury bonds to the 5% level could have strong psychological repercussions for investors, and could trigger a rapid reaction in the stock markets, as investors reassess the attractiveness of risky assets compared to the returns provided by bonds.

Regarding corporate performance, Peters noted that the growth in US corporate profits by about 30% during the second quarter, compared to about 15% in Europe, represents levels that are difficult to sustain for a long period, expecting the pace of profit growth to slow down in the coming periods.

These expectations reflect continued support for corporate earnings for the stock market, but rising bond yields could put increasing pressure on valuations, especially if the yield on 10-year US Treasury bonds approaches the 5% level.

The 10-year bond yield is seen as an important benchmark for pricing many financial assets, as a rise in it increases the cost of financing and raises the alternative return available to investors, which may reduce the attractiveness of stocks, especially highly valued stocks.

According to Peters, the overall trend for stocks remains positive, but the approach of 10-year bond yields to the 5% level could put markets to a difficult test, especially if this coincides with a slowdown in corporate earnings growth or a rise in political and economic uncertainty.

Therefore, bond yield movements and earnings expectations may become key factors determining the direction of global stocks in the coming period, along with the course of US monetary policy and developments in the global economy.