U.S. Treasury yields soar, how much longer can the American economy and stock market hold on? AI may become the most fragile link.

Original author: Zhang Yaqi

Global bond yields have climbed to decades-high levels, yet the economy and markets have shown remarkable resilience so far. As pressures begin to emerge in areas such as the European sovereign bond market, whether this resilience can continue has become the most pressing question for the market.

Goldman's latest research report consolidates insights from the International Monetary Fund, Moody's Analytics, and Goldman economists. IMF advisor Tobias Adrian maintains a cautiously optimistic stance, believing that as long as the rise in yields does not accelerate in a disorderly manner, the global economy is likely to continue its resilient state; Goldman economists expect the drag from high rates on U.S. economic growth to be relatively mild, around 0.2 percentage points by 2027, but if yields maintain their current levels, the drag effect will more than double to 0.5 percentage points. Moody's Analytics Chief Economist Mark Zandi's assessment is noticeably more pessimistic—he explicitly states that the U.S. economy is "fragile" rather than "resilient," estimating the probability of a complete economic derailment at about one-third.

From a market perspective, Goldman strategists generally believe that the banking system and stock market do not currently pose systemic risks, but warn that if yields rise further or interest rate volatility remains high, risk assets will face increasingly heavy pressures. The greatest common denominator of various perspectives points to one core question: can the highly interconnected, leveraged AI investment boom withstand the continued test of a high-interest rate environment? Zandi issued the most direct warning: if interest rates remain at current levels or higher for another quarter or two, "AI might become the first link to break in the economy."

Yield Rise: Driven Mainly by Fundamentals, Technical Factors Amplifying

The most notable feature of the current rise in global bond yields is its breadth. Goldman’s head of U.S. interest rate strategy, William Marshall, pointed out that yields across major economies have risen without a clear single leader market or trigger source, with both the front and long end of the yield curve reaching new highs in unison.

In terms of driving factors, Marshall attributes this rise mainly to fundamentals: strong economic growth, inflation risks, central bank hawkish policy shifts, a continuing investment cycle, and long-term fiscal risks. The term premium—i.e. the extra compensation investors require for holding long-duration assets—has soared to the highest level in over a decade. The rapid rise in yields since the end of September has also added technical factors related to hedge risks, pushing yields beyond the implied values of the fundamentals.

In terms of outlook, Marshall expects yields to fall as market expectations of easing inflation strengthen, but emphasizes that long-term high yields will exhibit some stickiness. Volatility in energy prices and fiscal pressures constitute major upside risks, while the ongoing expansion of AI capital expenditures and corresponding bond issuance are also suppressing demand for long-duration assets, resulting in an upward bias for long-end yields.

Growth Drag: Mild Baseline Scenario, But Risks Multiply if Rates Stay High

Goldman U.S. economist Pierfrancesco Mei characterizes the current U.S. economy as resilient, and expects in the baseline scenario—one more Fed rate hike in December, followed by three rate cuts in the second half of 2027, with the 10-year U.S. Treasury yield falling to 4.4% by year-end—the drag from high rates on 2027 GDP growth to be only about 0.2 percentage points.

However, if yields remain at current levels, the drag effect will exceed 0.5 percentage points. On the transmission channels, the 30-year mortgage rate breaking above 7% will further suppress residential investment; consumer spending is expected to be dragged down by about 0.2 percentage points due to weakening demand for durable goods; and increases in interest expenses for non-AI companies during debt refinancing are expected to pressure capital expenditure growth by about 0.3 percentage points.

Goldman global economists Joseph Briggs and Johan Allen constructed a quantitative rules framework: every 100 basis points increase in rates will lead to approximately a 6% decline in residential investment in major developed economies, an average decline of about 0.2% in consumer spending, and about a 1.8% drop in corporate capital expenditures, collectively resulting in a drag of about 0.6 percentage points on GDP of developed economies. In fiscal terms, the combination of large fundamental deficits and high rates is expected to push the U.S. debt-to-GDP ratio to 124% by 2035 (baseline scenario) and even 132% (if current rates persist).

Is the Economy Really "Resilient"? Zandi Raises Dissent

Amid a relatively optimistic market discussion, Mark Zandi stands out as the most cautious voice. He believes that describing the U.S. economy as "resilient" is "fascinating, almost frustrating," and the correct description should be "fragile."

Zandi pointed out that the labor market is the clearest signal of softness. Over the past year, the average monthly job gains have been about 40,000, nearly zero after excluding the healthcare sector; although the unemployment rate remains low, part of this is due to a drop in the labor participation rate; when adjusted, the actual unemployment rate would be at mid-4% levels, higher than the full employment level. Real wage growth is actually negative for low-to-middle income groups, and household savings are being continuously depleted.

In overall data, Zandi does not feel comforted by an approximately 2% real GDP growth rate. He estimates that about one-third of this, or 0.6 to 0.7 percentage points, comes from AI-related activities (including net contributions from AI capital expenditures and the wealth effect of AI-related stock prices). This implies that the growth rate of non-AI economies is only about 1% to 1.5%, "which is a pretty poor economic state."

Zandi also describes the U.S. fiscal situation as "the worst case I have ever seen": deficits exceeding 6% of GDP, a fundamental deficit over 3%, debt around 100% of GDP with an expected rise to 125% in 10 years, and federal interest expenses exceeding $1 trillion and rising rapidly. He assesses the probability of risks as: approximately one-quarter for a severe bond market sell-off, and about one-third for a complete economic derailment.

Banks and Credit Markets: Still Within Controllable Range

Despite Mark Zandi's high vigilance regarding potential fracture risks in the financial system, Goldman analysts have a relatively mild assessment of the banking and credit markets.

Former IMF Director of Monetary and Capital Markets Tobias Adrian and Goldman Financial Equity Research Head Richard Ramsden both believe that banks do not need to worry excessively. Ramsden pointed out that given the sensitivity of U.S. bank asset-liability structures, rising rates should help enhance net interest income; credit quality is not expected to deteriorate significantly unless broader economic downturn occurs; and after accounting for rate-driven security portfolio losses, most banks should still have excess capital.

In the credit market, Goldman's Chief Credit Strategist Amanda Lynam believes that the current impact of high rates on corporate credit is manageable within the context of robust growth, insufficient to trigger a significant rise in default rates. However, she also pointed out that if interest rate volatility returns to the high levels seen in 2022 to 2023, the confidence of yield-driven institutional investors will be impacted, leading to substantial pressure on demand for the investment-grade credit market.

U.S. Stocks: Current Rates Do Not Pose a Threat, but Upside Risks Cannot Be Ignored

Goldman's Chief U.S. Equity Strategist Ben Snider believes that the current yield levels should not prevent U.S. stocks from continuing to rise. Although the P/E ratio of the S&P 500 has dropped from 23 times to 19 times this year, strong earnings growth (over 30% growth in the past 12 months) has been sufficient to offset the impact of valuation compression, and the current stock-bond relative valuation—measured by the difference between the S&P 500 earnings yield and the real 10-year U.S. Treasury yield—is about 230 basis points, remaining relatively stable over the past two years, indicating that valuations have largely completed adjustments to the high yields.

However, Snider also raised two risk points to watch closely: first, if the 10-year U.S. Treasury yield rises by more than about 50 basis points (i.e., two standard deviations) within a month, it will trigger a typical pressure pattern seen in U.S. stock history; second, small-cap stocks, real estate, and residential builders' sectors sensitive to interest rates have shown evident divergence, with market breadth falling to the lowest levels since the internet bubble. Goldman multi-asset strategists Christian Mueller-Glissmann and Andrea Ferrario also emphasized that higher bond yields are reinforcing the strategic allocation value of bonds in multi-asset portfolios, with optimal bond allocation ratios expected to align towards a long-term average of 35% to 55%, but currently robust earnings growth still makes stocks more attractive relative to bonds.

AI: Potential Weak Link in the Narrative of High Growth

In the current economic and market discussions, AI is both the core engine supporting growth and the most watched potential weak point amid high-interest rate environments.

From an optimistic perspective, Goldman analysts believe that the risks from AI capital expenditure pressures are limited. The capital expenditures of hyperscalers have shown strong resilience against high rates and rising costs so far, comprising over two-thirds of U.S. AI investment; major AI-related issuers such as MSFT, META, AMZN, GOOGL, and NVDA typically have credit ratings between AAA and AA, with interest coverage ratios as high as 27.7 times and net leverage only 0.5 times, providing ample debt absorption capacity; Lynam also believes that the threshold for overturning AI-related debt issuance is extremely high.

However, Tobias Adrian expressed concern over the tripartite risks within the AI complex: the interconnectedness and cyclicality among multiple AI companies imply that earnings shocks from one company could quickly spread; the structure of leverage compounded by leveraged ETFs and derivatives formed between AI companies and investors; and the fundamental uncertainty of whether the strong revenue growth of AI enterprises can be sustained.

Mark Zandi's warning is the most direct: "If interest rates remain at current levels or higher for another quarter or two, AI could become the first link to break in the economy." He pointed out that persistent high rates will suppress stock prices related to AI, the reversal of wealth effects will further dampen consumption, and rising financing costs will make raising capital needed to maintain the current speed of AI construction increasingly difficult. Currently, AI largely operates on its own momentum and market optimism, but the duration of this state carries a high degree of uncertainty.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。