If rising rates were enough to end a bull market, we’d have entered a bear market long ago

The article argues the ‘Fed Model’ has turned bearish but questions the premise that rising rates reliably end bull markets. It notes that historically, rates typically fall as bull markets near their final top rather than rise. The takeaway is a cautious stance on rate-driven bearish narratives, with limited incremental information beyond commentary.

Analysis

The key mistake in the current debate is treating yields as the cause rather than the transmission channel. Equities usually break when higher rates are paired with tighter liquidity, deteriorating earnings revisions, or a widening credit impulse; on their own, rising nominal yields are often just a symptom of stronger nominal growth. That means the immediate loser is typically long-duration equity exposure (QQQ, ARKK, software) through multiple compression, while financials and parts of cyclicals can actually benefit if the move reflects better growth rather than policy error.

The second-order risk is not the headline level of rates but the speed and source of the move. A fast rise in the 10-year from term-premium shock can pressure equity vols, factor leadership, and buyback demand within days to weeks; if real yields keep climbing for 1-3 months, the damage tends to concentrate in the highest-valuation, lowest-cash-flow names. If the move instead coincides with stable credit spreads and firming EPS revisions, the S&P can digest it for much longer than the bear crowd expects.

The consensus seems too anchored to the old Fed Model, which has weak explanatory power in a regime where corporate margins, liquidity, and positioning matter more than bond-equity yield gaps. The real falsifier for the bullish read is not higher rates per se, but a simultaneous break in breadth, credit, and earnings revisions. In that case, the market transition from "healthy re-pricing" to "risk-off" can happen very quickly.

Key Decisions for Investors

• Prefer a relative-value short QQQ / long XLF pair over an outright index short if rates grind higher on resilient growth; target a 4-8 week window where valuation dispersion should widen. Falsify if credit spreads start widening faster than 15-20 bps.
• Use TLT as the cleanest hedge against a disorderly rates move, but size it tactically rather than structurally; the trade works best if the 10-year rise is driven by term premium rather than improving growth. Reduce hedge if real yields stall below recent highs.
• If you want equity exposure, rotate toward equal-weight S&P (RSP) or cyclicals over QQQ for the next 1-3 months; this is a better expression of "rates up, growth intact" than chasing megacap duration. Exit if earnings revisions roll over.
• Watch SPY breadth and credit as the real signal: if advance/decline weakens while HYG spreads gap wider, the bearish rate thesis becomes actionable. Until then, treat rate headlines as a headwind to multiples, not a standalone sell signal.
• Set an alert on the 10-year real yield and credit spreads rather than nominal yields alone; a move in real yields above recent highs with spreads >25 bps wider would justify de-risking growth exposure.