BofA Says Bonds Are Attractive for the First Time, U.S. Stocks May Have Lower Returns Than Treasuries Over Next Decade

Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America, stated that bonds have become a competitive alternative asset to the stock market for the first time. She warned that current investor sentiment is high, making the stock market vulnerable to negative shocks, with limited room for further gains. The yield on the U.S. 10-year Treasury has surpassed 5%, and BofA's valuation model indicates that the annualized return of the S&P 500 index over the next decade may be below this level. Policymakers are striving to avoid excessively high long-term interest rates, with the Federal Reserve and the Treasury Secretary closely monitoring changes in the long end of the yield curve. Demographic shifts suggest that the upper limit for U.S. interest rates may be lower than levels seen in the 1970s and 1980s, and artificial intelligence could bring about deflationary effects, alleviating long-term inflation and interest rate pressures. Against this backdrop, the bond allocation environment has become more favorable, and U.S. Treasury yields are unlikely to sustain levels above 6% to 7%.

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