(18/05/26)

JPMorgan’s latest market commentary comes as rising Treasury yields begin to challenge the resilience of the equity rally. The 30-year Treasury yield climbed to 5.13%, its highest level since 2007, while the 10-year yield reached 4.60%, driven by persistent inflation concerns and elevated oil prices.

Despite the rates backdrop, risk appetite has remained relatively firm. The S&P 500 briefly touched fresh highs, supported by continued strength in AI-linked equities and earnings resilience. Markets, however, have become increasingly sensitive to inflation surprises, with US CPI rising 0.6% month-on-month and 3.8% year-on-year.

For investment bankers, the environment remains mixed. Strong equity valuations continue supporting ECM pipelines and sponsor activity, but higher long-end yields could pressure leveraged financing conditions and slow large-cap buyout activity.

Market implications

• Higher yields are beginning to weigh on growth equities

• Inflation expectations remain elevated

• Energy and defensive sectors continue outperforming

M&A / deal flow implications

• ECM activity remains open but more selective

• Leveraged finance markets face renewed pressure

• Strategic M&A likely to outperform sponsor-led megadeals

3 key takeaways

1. Bond yields are now the market’s primary risk variable

2. AI continues supporting equity performance

3. Financing conditions are becoming less supportive for LBOs