Stocks have so far survived rising Treasury yields. But that may be about to change.

Equity markets have shown notable resilience during the recent climb in Treasury yields. Historically, rising bond yields pressure stock valuations by increasing the discount rate applied to future earnings and by offering investors a more attractive alternative in fixed income. What has offset that pressure this cycle is strong corporate earnings growth, which has kept equity valuations from compressing as sharply as yields alone might suggest.

The tension is straightforward: as long as profits keep expanding, stocks can absorb higher rates. The risk is that yields continue climbing without a matching improvement in earnings, leaving valuations more exposed. Bond yields also influence borrowing costs for companies and households, which can weigh on demand over time.

For market participants, the key question is whether earnings momentum can keep pace with the trajectory of yields. Watch the pace of yield moves, forward earnings revisions, and any signs that higher financing costs are beginning to affect corporate guidance or consumer activity.