Seema Shah said Treasury yields would probably have to reach 5% before they become a real problem for US stocks.
The market's usual rule of thumb is that 4.75% is the level where equity investors start to worry. Shah said that rule no longer holds while the thing pushing yields up is strong growth rather than inflation.
"But at this point in time with Treasuries at 480, to us, this isn't a real concern for equity markets."
Shah writes the house market view at Principal Asset Management, and on next week's Federal Reserve decision she said plainly that she and her team keep changing their minds.
I listened to the full segment so you can skip it.
Here are the 4 takeaways that matter.
👤 Guest: Seema Shah, Chief Global Strategist at Principal Asset Management, who sets the firm's published view on equities, rates and the Fed
🎙️ Host: Paul Sweeney, who co-hosts Bloomberg Surveillance on Bloomberg Radio
📰 Published: 9 September 2026, on the Bloomberg Surveillance podcast feed
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 6 min
Key Takeaways
Earnings are still the only thing driving this market, and the growth rate can only slow from here
Shah expects strong growth to continue, but at a slower pace, and more modest index gains for the rest of 2026
The midterms reinforce whatever trend is already running rather than starting a new one
The yield level that would genuinely trouble equities is nearer 5% than the old 4.75% trigger
What matters more is why yields are rising, and how fast they get there
The Fed's worry about its own inflation-fighting credibility is itself an argument for hiking
Shah does not think the Fed needs to move, and would rather it waited to see how consumers handle oil prices
1. Earnings Still Run It
Paul Sweeney opened by pointing at US equity markets hitting all-time highs almost daily, and cited Bloomberg's John Tucker on it having been an earnings-driven market. He asked Shah where corporate earnings go from here after what he called an extraordinary first half of 2026.
Shah agreed with the framing. Geopolitics and tariffs have moved markets this year, she said, but the thing actually driving them is earnings growth, and the second quarter was very strong. Her point was about arithmetic rather than deterioration: growth that is already running at a high rate cannot keep accelerating from that base.
The pace of earnings growth slows from here, and that means smaller index gains rather than a fall
"So we think it's still strong growth ahead."
She was explicit that a slower rate of growth "doesn't imply a pullback by any means"
She described the backdrop as still strong, with a number of challenges for the remainder of the year
Her conclusion for the rest of 2026 was "slightly more modest gains ahead for the remainder of 26"
2. Midterms Are Just Noise
Sweeney said the firm had been getting a lot of questions about the midterm elections since the start of the week, and asked whether they were a hurdle for the stock market.
Shah said midterms historically generate volatility and headlines without changing direction. What they typically do, she said, is reinforce the trend already in place — and that trend is set by fundamentals.
Unless the midterms change earnings, inflation or rates, they are not something investors should be positioning around
"But once the midterms are over and uncertainty starts to clear up again, the market typically returns to focusing on what usually drives it."
The main policy question she sees attached to the midterms is data centers
Even there, she said, the midterms themselves are unlikely to be the driving force behind what happens next to the data center build-out
3. The Yield That Would Bite
Sweeney gave the levels: a 10-year Treasury at 480 and a 30-year at 5.25%, and asked whether higher rates are a headwind for stocks yet. Those numbers are the show's, read off the screen, not Shah's.
Shah called it the hardest question in the market right now. The old convention, she said, is that once 10-year yields cross about 4.75% investors start to worry — but the reason for the move changes the answer.
Where the rise is driven by strong growth, earnings can carry equities over it
"Now, typically, you would see that Treasury yields, they cross like the 475 mark and everyone starts to really worry."
She said the level that becomes a genuine problem is higher than it used to be, and "It may be that we need to get the 5% level, but ultimately what really matters is one, is why are yields rising?"
The second question she applies is speed: "We've always seen that when you get a very, very sharp sell off, that's when equities start to struggle."
She described the current level as creating digestion problems and additional volatility rather than a threat
Her summary was that the speed limit for equities is a little lower for the rest of the year
4. A Knife's Edge on the Fed
Sweeney put to her that an earlier guest on that morning's program had said the Fed should raise rates next week, did not believe it would, and thought October more likely.
Shah said her own view keeps moving. Her team's forecast for Friday's core consumer price index is soft enough, she said, that it should be enough to keep the Fed standing on the sidelines. A hotter print would, in her view, make a hike likely.
She does not think the Fed needs to move, and would rather it waited on the consumer
"I don't actually think they need to. I do think that they should be standing by for a little bit longer, wait to see how consumers deal with oil prices."
The open question she named is whether consumers are actually slowing or staying robust
The credibility argument cuts toward a hike, not away from one
"I also think that the credibility issue is becoming a bigger one for the Fed. And that in itself raises the odds of a hike next week"
Her reasoning: a Fed that lets a firmer inflation print pass risks the market concluding it no longer has inflation-fighting credibility
She was candid about the uncertainty — "You know, I have to be honest. We go back and forth on this."
Bonus Insights
Sweeney framed the whole conversation off Bloomberg's own reporting, naming John Tucker on the market's run of all-time highs
Shah listed what markets go back to focusing on once an election passes: earnings, inflation and rates
Sweeney's sign-off described her as Chief Global Strategist at Principal Global Investors, a different form of the firm name from the one he used introducing her
Shah's bottom line was that equities can live with today's Treasury yields while strong growth is what is lifting them, and that the bigger risk into next week is a Fed that hikes to defend its own credibility rather than because the data demands it.
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