Goldman Sachs Warns 10-Year Treasury Yield Hit 5% Could Pressure Stock Valuations as New Fed Chair Takes Helm

According to Goldman Sachs, 10-year U.S. Treasury yields reaching 5% mark a critical threshold where stock valuations face systemic pressure, warned the bank's trading chief Tony Pasquariello. The threshold comes as new Federal Reserve Chair Kevin Warsh prepares to lead his first FOMC meeting, with markets closely monitoring whether long-term Treasury yields will constrain the stock rally fueled by artificial intelligence investment momentum.

While the 5% "red line" has not yet been breached, Goldman Sachs noted that bond market volatility is increasingly shaping U.S. equity direction. The bank's strategists believe AI capital expenditure expansion remains the primary support for stock gains, with market forecasts for major cloud providers' 2027 capex still appearing conservative at around $920 billion—Goldman sees potential for the figure to exceed $1 trillion. However, rising leverage, options market dynamics, and heightened market volatility could amplify price swings in coming months.