JPMorgan Warns Rising 30-Year Yields Threaten Small- and Mid-Cap Returns

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Summary · why it matters

JPMorgan strategists led by Eduardo Lecubarri warned that the climb in 30-year government bond yields poses a risk to small- and mid-cap stocks, arguing the move reflects government debt levels more than the path of short-term interest rates. They said that for the first time in history, about 60% of global GDP sits with governments running debt above 100% of GDP and a deficit, a 3-sigma event investors seem to be ignoring. The U.S. term premium has doubled, with the gap between the 30-year yield and the Fed funds rate widening to 1.42% from 0.73%, a level seen before only after the Fed funds rate fell more than 70%, which the strategists said is unlikely now. For SMid investors, the share of U.S. small- and mid-cap stocks with a dividend yield above the 30-year Treasury yield has dropped to 9% from 19% since the start of 2024, a 24-year low, with similar declines in the U.K. and continental Europe. JPMorgan added Dashenlin Pharmaceutical Group, a $3 billion Chinese company, and Befesa, a €1.4 billion German-listed company, both rated Overweight, to its model portfolio.

Impact on assets 4

Climate Adaptation & Water▲
Befesa SA
BFSA
▲ PositiveCapitalrelevance

JPMorgan added Befesa to its model portfolio with an Overweight rating.

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JPMorgan Chase & Co
JPM
± MixedMonetaryrelevance

JPMorgan strategists warn rising 30-year yields threaten small/mid-cap returns, but the bank itself is only the source of the research, not a subject of impact.

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