The 10-year Treasury yield is closing in on 5%, and Michael Lebowitz calls that level a line in the sand for the economy, the stock market and the Treasury itself.
Almost everything pushing yields higher right now, on his account, has nothing to do with actual inflation. It is narrative, not fundamentals.
"I do think that 10-year bond yields at 5%. Is potentially a line in the sand for both the economy, the stock market, and definitely the Treasury, and possibly the Fed."
Lebowitz has more than 35 years in the markets and co-runs portfolio strategy at RIA Advisors alongside Lance Roberts, work he grounds in the historical correlation between inflation and bond yields rather than the story of the week.
I listened to the full interview so you can skip it. 56 minutes of audio, 15 minutes of reading.
Here are the 9 calls that matter.
👤 Guest: Michael Lebowitz, CFA, Portfolio Manager at RIA Advisors, with more than 35 years of financial-markets experience
🎙️ Host: Adam Taggart, founder of Thoughtful Money
📰 Published: 10 September 2026 on YouTube (Thoughtful Money) · recorded 8 September 2026
🔴 YouTube | 🟣 Apple Podcasts | ⏱️ 56 min | ✅ Time saved: 46 min
Key Takeaways
Fundamentals, not narratives, ultimately drive bond yields — but narratives run the show short-term
His example of the gap: AMC and GameStop, where price detached completely from weak fundamentals
Stripped of oil and food, inflation is back where it was before the Iran war started
Core CPI is 2.5%, trimmed-mean PCE is 2.3%, break-even inflation expectations are 2.5%
Real economic growth is running at about a third of trend, and turns negative once AI capex is excluded
A long list of narratives, not fundamentals, is what's actually pushing yields up: federal deficits, hyperscaler AI debt, spiking memory-chip prices, and a Fed chair who has stopped giving guidance
He thinks the bond market, not the Fed, is more likely to cap yields near 5% first
Insurance companies and pension funds start buying aggressively at that level for asset-liability reasons
A 5-year bond at 5% today is close to a free option on a stock-market selloff
If stocks fall and yields drop, he can sell the bond at a profit and buy stocks cheap
Fed Chair Warsh's hawkish Jackson Hole pivot cuts against his own preferred inflation gauge
The Dallas Fed's trimmed-mean measure has sat at 2.28% for four or five months
Lebowitz personally doubts a September hike, even though markets price a two-thirds chance of one
His real advice has nothing to do with timing the bond market: lock in a return that meets your goals and stop benchmarking yourself against the S&P 500
1. Fundamentals vs. Narratives
Lebowitz and Lance Roberts have been calling for lower yields for a while, and two shocks have delayed it. "So kind of one of our themes is that there's bond fundamentals and there's bond narratives. And at the end of the day, historically, fundamentals drive yields." The Iran conflict and new tariffs both pushed yields higher this year despite that framework
His proof that narratives can override fundamentals for a while comes from equities. "AMC and GameStop are two great examples where the price is shot through the moon. The fundamentals of the two companies were not that good and ultimately price or in our case yield comes back to fundamentals"
He named the narratives currently working on the bond market: deficits, AI debt, memory-chip prices, the Bank of Japan's yen intervention, "cocktail party" inflation fears, and a Fed chair who isn't giving markets guidance ahead of next week's meeting
2. What the Fundamentals Say
Once the Iran-war energy spike is stripped out, inflation is unremarkable. "Core CPI is 2.5%." On his preferred gauge: "If we use the trimmed mean PCE, which is what Warsh has said he prefers, where you just take out the outliers, you got 2.3% and break even inflation expectations are 2.5%." All three measures, he said, sit almost exactly where they were before the Iran war began
The August jobs report doesn't settle much, in his view. "We had a great employment report last Friday, but we've seen massive revisions," and neither the ADP nor JOLTS data confirm the strength
Growth is weak once the AI buildout is set aside. "If you kind of you know and this is appropriate... let's just think about the fundamentals." He put real growth at roughly a third of trend, called real wages flat to negative, and said: "If you strip out AI, it's probably been flat to negative"
3. Narratives Push Yields Up
AI's capital needs are becoming a bond-market story in their own right. "A lot of these big hyperscalers have started going beyond their free cash flow and are now hitting the debt markets and the equity markets for capital" — new supply competing for the same buyers as Treasurys
Memory-chip prices are a small but real inflation channel. "We've seen memory chip prices spike over the last six months or so. That's inflationary because it, you know, we saw Apple raise their prices"
He dismissed the popular sense that inflation is outrageous as a framing error. "This is the cocktail party inflation problem," he said, arguing people confuse a high price level with an accelerating one. "If the price of eggs goes from $3 a dozen to $6 a dozen and then stays at six for a year, there is no inflation in eggs despite the fact it's twice as much as it was a year or two ago"
A silent Fed chair is itself destabilizing, in his account. "I think the market feels like it's kind of rudderless a little bit without the Fed walking the market on its leash"
4. Who Caps Yields First
He expects private capital to step in around 5% before any policy intervention. "I think the market may step in at 5% before central planners." "So, insurance companies, endowments, you know, there are the largest institutional money managers will likely be willing to chomp at 5% to take it in because from a asset liability perspective, that is big"
Stocks wobbling would accelerate the shift, as money that has chased 20% equity returns instead of "flat to losing money in bonds" starts looking for the safety of a locked-in 5%
He still expects the Fed and Treasury to act eventually. He noted Treasury Secretary Bessent has already increased buybacks, and said the Fed is less likely to move because Chair Warsh has been adamant that quantitative easing is a mistake
5. Bonds as a Free Option
The setup looks like the mirror image of stocks, in his framing. "Cape is sitting at like 41, implying that returns for the next 10 years are going to be zero," while a decade of poor bond returns has historically preceded strong ones — "This is almost the opposite of the Cape chart"
He described the asymmetry directly. "Let's say you buy a 5-year bond today at 5% for argument sake, right? And you're comfortable. You know what? Worst case, I just hold it for five years. I get my money back and I've earned 5% every year for the last five years." If stocks fall instead and yields drop: "You have that free option to sell the bond, take your price profit, and now buy stocks on sale"
What makes today different from prior cheap-bond cycles, in his view, is the coupon. Rates were held near zero for so long that this drawdown has less yield cushioning it than past bond bear markets did — in the 1950s, he noted, coupons ran closer to 2.5% rather than today's much thinner starting point in real terms
6. How RIA Is Positioning
The firm hasn't started buying more duration yet. A standard 60/40 portfolio currently holds about 10% cash, a 20-year bond, and shorter-term bonds and mortgages. Lebowitz wants technical confirmation before adding: "I want to see technical signs that the tide is turning that I want to see narrative starting to change"
He'd rather act late with conviction than early without it. He said he prefers buying after confirmation that yields are falling to catching what might still be "a falling knife" at the peak, even if that means missing the exact top
Owning bonds already changes the calculus, he said, comparing it to owning a stock: he's not rooting for prices to fall just because he'd like to add at a better level
7. Warsh's Pivot Doesn't Add Up
Fed Chair Warsh turned more hawkish at Jackson Hole after two months of cooling data, which Lebowitz finds hard to square. Recent CPI prints came in at -0.4% and +0.1% to +0.2%, and the jobs report ahead of the speech showed a loss of 23,000 positions — "the most recent data" at the time
The inconsistency, in Lebowitz's telling, is that Warsh's own stated preference is for a trimmed-mean measure that reads calmer. "When you look at the Dallas Fed mean trimmed, it's 2.28%. It's been there for four or five months," alongside "median PCE is 2.7% core CPI is 2.5%" — all comfortably closer to target than the headline figures Warsh's speech leaned on
Lebowitz's read is that the speech was more about credibility than data. He called it: "So where what I think he's doing is trying to talk a tougher talk and put more credibility towards the Fed's inflation fighting prowess." The real question, he said, is whether that talk turns into an actual hike on Wednesday
8. The Fed Meeting Next Week
Markets have already priced in a hike, but Lebowitz hasn't fully bought it. "The market is saying there's a two-thirds chance they raise rates," yet "I personally don't think he's going to raise rates this September" — citing political pressure heading into a midterm-election year
If a hike does come, he expects it to be reversible quickly. Citing Darius Dale: "Although he'll be on ear later this week, folks, Darius Dale, he his default expectation was that Warsh was going to do a hike, quarter point, maybe even another quarter point hike at some point this fall" — largely to establish inflation-fighting credibility before pivoting to cuts heading into 2027
Either outcome carries a market-reaction risk, in his framing. A hike into an economy the market has already tightened through higher auto, mortgage and corporate borrowing costs risks a policy mistake; doing nothing risks the market concluding Warsh is soft on inflation and pushing the 10-year to 5% anyway
9. AI Cuts Both Ways
He doesn't see AI as simply inflationary or simply disinflationary. Asked how it fits the secular lower-yields thesis, he said: "How does AI impact the economy? Does it create explosive growth? Does it create disinflation? And I think the answer is yes, it creates growth and yes, it creates disinflation"
Right now the inflationary side is more visible. Beyond memory chips, he pointed to the sheer scale of the buildout: "This data center building is massive. It's a good chunk of the economy, economic growth"
The open question is timing — when AI's productivity gains start showing up in growth and inflation data rather than just capital spending, which he called genuinely hard to know
Bonus Insights
Both host and guest use Claude to build their presentation slides now, and Taggart said it shows. Lebowitz: "My assistant Claude did a great job making taking my comments and making it look nice." Taggart recalled his early Wall Street years waiting on a dedicated graphics department to fix a single typo on a slide, calling today's version "only about a cup of coffee" worth of time
Lebowitz's closing advice is about financial planning, not market timing. Referencing scenario-planning software his firm uses with clients, he said: "You know, and you plot out these scenarios and this really incredible software tells you, well, based on what you have and what you think you're going to spend and inflation and a lot of other factors, you have a 98% chance if you can earn 5% or more of meeting your goals" — a target he said matters more than beating the S&P 500
The behavioral case for locking in yield now, in his words: when the odds of hitting your goal are already high at a safe pace with a safe instrument, why get "tempted to screw up your odds for success"
He flagged a specific warning sign in investor behavior. "We just see kind of record levels of percent equity exposure in all cohorts of investors, and it seems to go up the older the investor cohort is, which is crazy because they should be de-risking"
Lebowitz's bottom line is that the fundamentals already argue for lower yields, and once the current run of narratives fades, the 10-year is more likely to head toward the real growth rate than toward 6%.
Products, Companies & Tools Mentioned
RIA Advisors (Lebowitz's firm, where he and Lance Roberts run portfolio strategy together)
Claude (The AI tool Lebowitz uses to build his presentation slides, and that Taggart says has replaced what used to take a dedicated graphics department)
Nvidia, Apple and Microsoft (Cited as examples of index weight mattering more than company count — the reasoning Lebowitz used to question how Warsh's inflation data was framed)
Books & Resources Mentioned
Adam's write-up of this episode (Taggart's own published notes for this conversation, on his Substack)
If this was worth your time, send it to someone who has to have a view on this.
Get the latest market chatter as it happens: