Khoo Sees S&P 500 Weathering 5% Yields as Rates Match 76-Year Norm

Adam Khoo

A 5% 10-year Treasury yield remains below the 76-year historical average of 5.52%, meaning equities will avoid a crash and continue compounding as long as corporate earnings growth outpaces inflation.

AI-assisted summary of Will Rising Long Term Rates Crash Stocks? — original source. Check the original for full context.

Source published: 2026-09-14

Key ideas

The U.S. 10-year Treasury yield's climb near 5% reflects a standard macro baseline of ~1.5% real GDP growth and ~3.4% CPI inflation, set by open-market debt dynamics rather than direct Federal Reserve decree. (0:00)
A 5% bond yield sits right within historical norms, below the 76-year mean of 5.52% and near the median of 4.72%, with past regimes like the 1980s delivering 17.0% annualized equity returns despite double-digit yields. (5:14)
Rising yields disproportionately pressure unprofitable growth firms, leveraged cyclicals, and REITs due to higher DCF discount rates and refinancing costs, while established cash-rich compounders remain insulated. (14:58)
Financial institutions and balance-sheet-heavy mega-caps serve as natural rate beneficiaries, generating higher net interest margins and offsetting debt expenses with interest earned on cash reserves. (19:32)

Detailed notes

## Background Published by professional investor and author Adam Khoo on YouTube on September 14, 2026, this video examines whether surging U.S. 10-year Treasury yields approaching 5.0% threaten to trigger a major stock market crash. The presentation explores the mechanics behind rising bond yields, assesses historical rate environments, and outlines which market sectors are most vulnerable versus those positioned to thrive under higher borrowing costs.

## TL;DR Adam Khoo demonstrates that 10-year Treasury yields hovering near 5% remain squarely within historical norms rather than signaling an impending market collapse, noting that strong corporate earnings growth historically allows equities to thrive alongside elevated rates. Rising yields transmit pressure through higher corporate debt refinancing costs and steeper DCF discount rates, which severely compress valuations for unprofitable tech companies, REITs, and leveraged cyclicals. Conversely, cash-rich mega-cap tech, commercial banks, insurers, and exchange operators like ICE are insulated or actively benefit from higher rates. Khoo argues that investors should abandon futile interest rate forecasting and instead construct a resilient, all-weather portfolio anchored in the top 1% of cash-generative compounders.

## Atmosphere & style The presentation is pragmatic, calm, and educational, cutting through prevailing financial news anxiety with long-term historical data and balance sheet logic. Khoo adopts an authoritative yet conversational coaching style, using clear frameworks and occasional dry humor to dismiss macro panic. Watching it feels like a stabilizing masterclass that shifts the viewer's focus away from reactive headline-chasing and toward disciplined fundamental stock picking.

## Bulletin - [00:00](https://www.youtube.com/watch?v=t9P3BKPndnI&t=0s) The U.S. 10-year Treasury yield's climb near 5% reflects a standard macro baseline of ~1.5% real GDP growth and ~3.4% CPI inflation, set by open-market debt dynamics rather than direct Federal Reserve decree. - [05:14](https://www.youtube.com/watch?v=t9P3BKPndnI&t=314s) A 5% bond yield sits right within historical norms, below the 76-year mean of 5.52% and near the median of 4.72%, with past regimes like the 1980s delivering 17.0% annualized equity returns despite double-digit yields. - [14:58](https://www.youtube.com/watch?v=t9P3BKPndnI&t=898s) Rising yields disproportionately pressure unprofitable growth firms, leveraged cyclicals, and REITs due to higher DCF discount rates and refinancing costs, while established cash-rich compounders remain insulated. - [19:32](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1172s) Financial institutions and balance-sheet-heavy mega-caps serve as natural rate beneficiaries, generating higher net interest margins and offsetting debt expenses with interest earned on cash reserves.

## Key takeaways - [00:00](https://www.youtube.com/watch?v=t9P3BKPndnI&t=0s) The 10-year Treasury yield is driven by open-market supply and demand rather than the Federal Reserve, roughly matching the sum of real GDP growth (~1.5%) and headline CPI inflation (~3.4%). - [02:20](https://www.youtube.com/watch?v=t9P3BKPndnI&t=140s) Higher bond yields affect equities through two primary channels: elevating corporate borrowing costs and raising the discount rate used to value future cash flows. - [02:20](https://www.youtube.com/watch?v=t9P3BKPndnI&t=140s) Valuations of unprofitable speculative growth companies are crushed under higher yields because their cash flows are projected far into the future, whereas near-term cash generators suffer minimal discounting impact. - [05:14](https://www.youtube.com/watch?v=t9P3BKPndnI&t=314s) Taking a 76-year perspective from 1950 reveals that current yields around 4.9% are completely normal, sitting slightly below the historical average of 5.52% and near the 4.72% median. - [08:30](https://www.youtube.com/watch?v=t9P3BKPndnI&t=510s) Stock market performance is not hindered by elevated rates alone; the S&P 500 delivered a 17.0% annualized CAGR during the 1980s when 10-year yields averaged 10.6%. - [12:05](https://www.youtube.com/watch?v=t9P3BKPndnI&t=725s) During the 2000s 'lost decade' where broad indexes ended flat, high-quality businesses with consistent cash flows, high ROIC, and pricing power delivered outsized multi-bagger returns. - [13:46](https://www.youtube.com/watch?v=t9P3BKPndnI&t=826s) The danger of rising yields depends on earnings growth: yields surging alongside flat or falling corporate earnings trigger bear markets, but yields rising with expanding profits allow equities to advance. - [14:58](https://www.youtube.com/watch?v=t9P3BKPndnI&t=898s) Unprofitable tech companies, REITs facing dividend cuts from higher interest expenses, and heavily leveraged cyclicals like airlines and telcos represent the most vulnerable sectors. - [19:32](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1172s) Commercial banks expand net interest margins and insurance firms invest floats at higher yields, making financials an effective direct hedge against rising rates. - [19:32](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1172s) Cash-rich mega-caps like Meta and Alphabet effectively neutralize debt service obligations with substantial interest income earned on their cash piles. - [23:08](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1388s) Exchange operators like Intercontinental Exchange benefit structurally from higher rates by collecting increased margin interest and profiting from volatile energy derivative volumes. - [23:27](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1407s) Macroeconomic rate forecasting is consistently inaccurate, underscoring the necessity of building an all-weather portfolio anchored in durable compounders rather than guessing policy paths.

## Detailed walkthrough ### [00:00](https://www.youtube.com/watch?v=t9P3BKPndnI&t=0s) Rising 10-Year Treasury Yields and the Inflation Equation

With the U.S. 10-year Treasury yield climbing rapidly and closing in on 5%, investors are growing increasingly anxious about whether a major stock market crash is imminent. Recent months have seen long-term government bond yields march upward, driven higher by persistent inflation, geopolitical conflict, and oil price pressures. Investors naturally want to know which stocks are sitting in the crosshairs, which are insulated from the damage, and how to position a portfolio to survive or even thrive in this environment.

To understand the threat, investors must first recognize how the 10-year Treasury yield is actually determined. Often referred to simply as the "long rate," long-term interest rates are not set by the Federal Reserve. While the Fed dictates the short-term benchmark—the federal funds rate, which central bankers adjust at policy meetings—long-term rates are set by open-market supply and demand for U.S. government debt.

At a high level, the 10-year yield reflects a straightforward macro baseline: real GDP growth plus inflation. For example, with second-quarter real GDP coming in at approximately 1.5% and headline CPI inflation registering at 3.4%, combining the two produces 4.9%—almost precisely where the 10-year Treasury yield sits.

```mermaid flowchart LR accTitle: Macro Determinants of Long-Term Bond Yields accDescr: Real GDP Growth and CPI Inflation combine to drive the market-determined 10-Year Treasury yield. subgraph Macro["Macroeconomic Drivers"] GDP["Real GDP Growth (~1.5%)"] CPI["Headline CPI Inflation (~3.4%)"] end Yield["U.S. 10-Year Treasury Yield (~4.9%)"] GDP --> Yield CPI --> Yield ```

- **Short-Term vs. Long-Term Rates**: The Federal Reserve controls the short-term federal funds rate; the open market sets the 10-year Treasury yield through bond supply and demand. - **The Yield Formula**: Long-term yield roughly equates to Real GDP Growth plus Inflation. - **Current Macro Snapshot**: 1.5% real GDP growth plus 3.4% CPI inflation lands bond yields right around 4.9%.

---

[02:20](https://www.youtube.com/watch?v=t9P3BKPndnI&t=140s) How Rising Long-Term Yields Impact Stocks: Debt and Discount Rates

Surging long-term interest rates hit individual equities through two distinct mechanisms. The first direct channel is corporate borrowing costs. When an investor buys a share of stock, they own a piece of a business. Companies burdened with heavy debt loads face mounting interest expenses when they issue or refinance bonds at higher prevailing rates. As interest expenses climb, profit margins compress, bottom-line earnings shrink, and the underlying intrinsic value of the business drops. By contrast, companies operating with clean balance sheets and minimal debt can brush off higher rates completely: "Interest rates go up, I don't care. I don't have much debt."

The second mechanism operates through discounted cash flow (DCF) modeling. A business's intrinsic value equals the present value of all its future cash flows discounted back to today, and the discount rate applied in valuation models is anchored to the 10-year Treasury yield. When yields spike, the required discount rate rises. This disproportionately punishes unprofitable, speculative growth companies whose projected cash flows sit 5 to 10 years out in the future. Heavily discounting cash that will not arrive for a decade dramatically slashes a company's present intrinsic value. However, established businesses that already throw off massive cash flows right now suffer far less, because the bulk of their value is realized in the near term.

```mermaid flowchart TD accTitle: Transmission Mechanisms of Rising Yields accDescr: Rising bond yields transmit into lower intrinsic valuations via higher borrowing costs and higher discount rates. Yield["Rising 10-Year Treasury Yield"]

subgraph Channel1["Borrowing Cost Channel"] Debt["Higher Corporate Borrowing Costs"] Expense["Increased Interest Expenses"] Profits["Compressed Net Margins"] end

subgraph Channel2["Valuation Channel"] Discount["Higher Valuation Discount Rate"] FutureCash["Deeply Discounts Future Cash Flows"] end

ValuationDrop["Sharply Lower Intrinsic Value for Unprofitable/Indebted Stocks"]

Yield --> Debt Debt --> Expense Expense --> Profits Profits --> ValuationDrop

Yield --> Discount Discount --> FutureCash FutureCash --> ValuationDrop ```

- **Vulnerable Profiles**: Highly leveraged companies face surging interest expenses; unprofitable companies face severe valuation compression because their expected earnings sit far in the future. - **Immune Profiles**: Cash-rich businesses with low or zero debt, paired with high existing profitability, remain largely unaffected by long-rate fluctuations.

---

[05:14](https://www.youtube.com/watch?v=t9P3BKPndnI&t=314s) Historical Perspective: Is a 5% Yield Dangerously High?

While rates hovering between 4.9% and 5.5% feel shockingly steep to investors who grew accustomed to the record lows of the pandemic era—when yields dropped to a historic low of 0.7%—a longer historical lens provides crucial context. Taking a 76-year perspective on the S&P 500 and Treasury yields dating back to 1950 reveals that current yields are not an anomaly; they sit right in line with historical norms.

Across those 76 years, the 10-year Treasury yield peaked in 1981 at a staggering 15.6% during the Paul Volcker inflation battle, and bottomed out in 2020 at 0.7%. Over that entire seven-decade span, the historical mean yield stands at 5.52%, with a median of 4.72%. Sitting around 4.9%, today's yield is actually resting slightly below the long-term historical average. A 5% yield is by no means an automatic red flag for an equity collapse; panic is unwarranted unless rates blow past historical boundaries toward 7%, 8%, or 9%.

- **Historical Peak (1981)**: 10-year Treasury yield hit 15.6%. - **Historical Trough (2020)**: Yield collapsed to 0.7% during the height of the COVID-19 pandemic. - **76-Year Average**: The historical mean is 5.52%, and the median is 4.72%. - **Current Position**: Yields around 4.9% sit essentially right at the historical center line.

---

[08:30](https://www.youtube.com/watch?v=t9P3BKPndnI&t=510s) Decade-by-Decade Market Returns vs. Bond Yields

Examining the historical record decade by decade shows that high bond yields do not prevent equities from delivering spectacular gains. In the 1950s, amidst a post-war economic boom and low inflation, yields averaged 3.2% while the S&P 500 delivered a blistering 19.0% compound annualized growth rate (CAGR). The 1960s saw average yields creep up to 4.7% during an era of rising inflation, yet the market still generated a 7.8% annualized return. Even the turbulent 1970s—plagued by severe oil shocks and an average yield around 7.5%—managed a positive annualized return of 5.9%, outrunning inflation across the decade.

The 1980s provide the clearest proof that equity bull markets can coexist with high interest rates. During that decade, average 10-year Treasury yields stood at 10.6%—more than double current levels. Yet, the S&P 500 compounded at an extraordinary 17.0% annually, ranking among the best performing decades in stock market history. By comparison, during the first six years of the 2020s, yields have averaged 3.1% while the market has compounded at 15.5%.

| Decade | Average 10-Year Yield | S&P 500 Total Return (Annualized CAGR) | Economic Backdrop | |:--- |:--- |:--- |:--- | | **1950s** | 3.2% | 19.0% | Post-war economic boom; low inflation | | **1960s** | 4.7% | 7.8% | Rising inflationary pressures | | **1970s** | 7.5% | 5.9% | Oil shocks; high inflation | | **1980s** | 10.6% | 17.0% | Volcker disinflation; explosive bull market | | **2000s** | 4.5% | Negative | "Lost Decade": Dot-com bust and 2008 GFC | | **2020s (to date)** | 3.1% | 15.5% | Recovery, tech leadership, rising inflation |

The sole negative decade was the 2000s, where average yields were a moderate 4.5%, but the market was slammed by two catastrophic events: the dot-com collapse and the 2008 Global Financial Crisis. Even during that notorious "lost decade" where broad indexes finished underwater, high-quality businesses with durable balance sheets, rising revenues, and strong free cash flow managed to generate substantial positive returns for disciplined investors.

[12:05](https://www.youtube.com/watch?v=t9P3BKPndnI&t=725s) Outperforming in a "Lost Decade" with Top 1% Quality Businesses

Reflecting on past market cycles, Adam highlights that during the infamous "lost decade" (the 2000s), an investor holding the broad S&P 500 endured a brutal crash, a recovery, another crisis, and ultimately ended the 10-year period virtually flat—having gone nowhere. However, picking individual companies in the top 1% that maintained consistent growth in revenue, net profits, and cash flow alongside wide economic moats produced staggering returns. During that exact same decade when the index stood still, a basket of disciplined compounders exploded in value. Adam stresses that this does not mean one should blindly buy these exact legacy names today, as business dynamics evolve.

Instead, the lesson is to identify the modern equivalents belonging to that top 1% today: businesses boasting consistent cash flow growth, minimal debt, high return on equity (ROE), superior return on invested capital (ROIC), and impregnable competitive advantages. Anchoring a portfolio in these high-quality, highly profitable companies removes the fear of a broader market stagnation or another lost decade, because fundamental business performance will ultimately drive stock returns regardless of index headwinds.

- **Monster Beverage:** Gained 18,000% across the decade. - **Tesco:** Gained 3,900%. - **AutoZone:** Gained 1,400%. - **The TJX Companies (TJX):** Gained 1,100%. - **UnitedHealth Group:** Gained 690%. - **Starbucks:** Gained 587%.

[13:46](https://www.youtube.com/watch?v=t9P3BKPndnI&t=826s) The Real Impact of the 10-Year Treasury Yield: Pace and Earnings Growth

Historical data reveals a counterintuitive truth: high 10-year Treasury yields do not inherently mean equities deliver negative returns. In fact, some periods marked by relatively high 10-year yields produced some of the market's strongest 10-year annualized returns. The threat to equity markets is dictated by two distinct factors: the velocity of the yield's ascent, and the fundamental macroeconomic driver behind that rise.

If yields surge purely due to runaway inflation while corporate earnings stall or contract, equities face a severe valuation crunch, paving the way for sharp corrections or bear markets. Conversely, if bond yields drift higher while underlying corporate earnings expand briskly—as evidenced in recent earnings seasons—the broader stock market can climb in tandem with the 10-year Treasury yield. The ultimate trajectory depends on earnings durability rather than the absolute level of interest rates alone.

```mermaid flowchart TD accTitle: Rising Treasury Yield Drivers and Equity Impact accDescr: A flow chart showing how high yields driven by inflation versus corporate earnings determine whether stock markets crash or rise.

Yield["Rising 10-Year Treasury Yield"]

subgraph BearishCase["Scenario A: Inflation Driven"] Inf["High Inflation"] --> FlatEarnings["Flat or Declining Corporate Earnings"] FlatEarnings --> Crash["Stock Market Correction / Bear Market"] end

subgraph BullishCase["Scenario B: Growth Driven"] Growth["Economic Expansion"] --> StrongEarnings["Robust Corporate Earnings Growth"] StrongEarnings --> Bull["Stock Market Rises Alongside Yields"] end

Yield --> BearishCase Yield --> BullishCase ```

[14:58](https://www.youtube.com/watch?v=t9P3BKPndnI&t=898s) The Most Vulnerable Assets: Unprofitable Growth, REITs, and Cyclicals

If the long-term 10-year rate advances toward 5% or 6%, portfolio asset allocation becomes critical. Investors heavily concentrated in rate-sensitive names must rebalance, whereas those sheltered by rate-resilient holdings have far less cause for concern. The first category most vulnerable to higher rates comprises unprofitable growth and emerging tech companies. Because these firms generate virtually all expected cash flows far into the future, hiking the discount rate in a discounted cash flow valuation crushes their intrinsic value. Checking financial platforms like Stock Oracle reveals companies like Snowflake, Cloudflare (NET), and quantum computing play IonQ continue to operate at steep net losses, leaving them acutely exposed.

The second highly vulnerable group is Real Estate Investment Trusts (REITs) and utility companies. Both sectors rely extensively on debt financing to fund heavy infrastructure and real estate acquisitions. As rates remain elevated, interest expenses spike, eroding distributable net income and forcing dividend cuts—the primary reason REIT valuations have sagged. Adam notes that while his Singapore REIT holdings have pulled back, his broader dividend portfolio remains net positive because it is hedged with massive stakes in Singapore banks, which profit from the exact same rate dynamics.

The third vulnerable group is highly leveraged cyclicals, such as airlines, telecommunications providers, cable networks, and property developers. These businesses naturally carry bloated balance sheets; when servicing costs increase, operating margins shrink quickly, dragging down stock prices.

```mermaid flowchart LR accTitle: Rising Rates Impact on Vulnerable Sectors accDescr: Three groups of stocks that suffer when long-term interest rates increase.

subgraph HighRates["Higher Discount Rates & Borrowing Costs"] direction TB Rates["Rising Long-Term Yields"] end

subgraph Vulnerable["Most Impacted Sectors"] direction TB Tech["Unprofitable Tech / Growth\n(Snowflake, Cloudflare, IonQ)\nDCF discount rates crater present value"] REITs["REITs & Utilities\nDebt-heavy balance sheets;\nInterest expense cuts dividends"] Cyclicals["Leveraged Cyclicals\n(Airlines, Telcos, Developers)\nHigh debt servicing erodes income"] end

Rates --> Tech Rates --> REITs Rates --> Cyclicals ```

[19:32](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1172s) Rate Winners and Insulated Compounders: Financials, Mega-Caps, and Short-Duration Value

Conversely, several market segments benefit directly from elevated yields or maintain fortress balance sheets that neutralize the damage:

1. **Banks and Insurance Companies:** Commercial banks expand their net interest margins (NIM) as benchmark lending yields widen. Adam's major positions in Singapore banks—DBS, UOB, and OCBC—form over half of his dividend portfolio and thrive in this climate. Similarly, property/casualty and life insurers like Arch Capital Group (ACGL) and Germany's Allianz deploy their enormous insurance floats into higher-yielding fixed-income instruments, generating substantial risk-free investment returns. 2. **Cash-Rich Mega-Cap Tech:** While bears argue that tech giants like Meta, Google (Alphabet), Apple, and Microsoft take on debt to finance artificial intelligence data centers, their gargantuan cash and short-term equivalent piles earn substantial interest income. In Meta and Alphabet's case, interest earned on cash reserves effectively cancels out debt servicing obligations, leaving their net bottom lines essentially unbothered: "net net what happens if interest rates go up they're like me whatever." 3. **Energy and Commodities:** Although high inflation environments drive up commodity and energy profits, Adam purposefully bypasses oil, natural gas, and copper producers due to their long-term index underperformance and unpredictable price swings. 4. **Short-Duration Value Stocks:** Mature, consistently profitable stalwarts with strong current pricing power—such as Linde plc, Mastercard, Visa, Motorola Solutions, and Intercontinental Exchange (ICE)—carry little valuation sensitivity to rising discount rates and frequently leverage transaction volumes to harvest higher margins.

[23:08](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1388s) Rate Beneficiaries: Intercontinental Exchange

Continuing the examination of businesses uniquely positioned to thrive in an environment of escalating yields, Intercontinental Exchange (ICE) stands out due to two primary structural advantages. First, the exchange operator profits directly from financing: as benchmark rates climb, the company generates substantially higher margin interest on the leverage extended to its trading customers.

Second, Intercontinental Exchange commands a massive footprint in energy derivatives. Whenever energy markets experience price volatility or structural upward pressure, trading volumes in energy futures surge, generating a substantial tailwind of exchange fees. These operational levers allow exchange operators like ICE to convert macroeconomic friction into steady revenue, insulating them from the valuation compressions that often plague broader equity markets when bond yields push higher.

- **Margin Interest Expansion**: ICE collects higher interest spreads on customer margin balances as underlying rates escalate. - **Energy Derivatives Surge**: Rising energy costs trigger heightened hedging and speculative volume across ICE's energy futures marketplace.

---

[23:27](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1407s) The Folly of Rate Forecasting and the Bulletproof Portfolio

Reflecting on broader market psychology, the secret to achieving consistent, long-term profitability as an investor does not lie in attempting to outguess market moves or anticipate macroeconomic pivots. No one can forecast market directions or interest rate trajectories with reliable accuracy. Looking back at the consensus narrative late last year and entering the current year, virtually the entire financial media and Wall Street analyst community anticipated that policymakers would cut interest rates three to four times. Instead, zero cuts materialized, and market participants have suddenly reversed course to fret over further rate hikes.

```mermaid flowchart TD accTitle: Forecasting Pitfalls vs. Resilient Portfolio Strategy accDescr: Contrasts the failure of consensus rate forecasting with the strategy of constructing an all-weather portfolio.

subgraph Trap["The Forecasting Trap"] A["Consensus Forecast:<br/>3 to 4 Rate Cuts"] --> B["Reality:<br/>Zero Cuts & Rising Rates"] B --> C["Portfolio Shock & Panic"] end

subgraph Approach["The Resilient Approach"] D["Acknowledge Unpredictability"] --> E["Diversify Across Rate Winners & Resilient Assets"] E --> F["Bulletproof Portfolio:<br/>All-Weather Performance"] end ```

Even the Federal Reserve itself cannot accurately project where the long-term yield curve will settle. Given this reality, the prudent approach is to "stop trying to predict the market" and "stop trying to predict interest rates." Rather than staking capital on speculative macro forecasts, investors must focus on building a resilient, "bulletproof portfolio that will do well under all market conditions." There is no reason to panic over higher long-term yields at this stage, as borrowing costs are simply fluctuating within a historically "normalized zone."

To navigate these shifts effectively, Adam Khoo reminds viewers to maintain discipline across market cycles: - **Subscribe and Stay Informed**: Turn on bell notifications on YouTube to track timely market updates. - **Structured Education**: Explore online investing and options trading curriculums at Piranha Profits (`piranhaprofits.com`) to generate durable global income. - **Live Interactive Training**: Join the live Wealth Academy mentorship program (`wealthacademyglobal.com`) to master live trading and valuation strategies. - **Closing Blessing**: "May the markets be with you!"

## Notable quotes > [02:20](https://www.youtube.com/watch?v=t9P3BKPndnI&t=140s) Interest rates go up, I don't care. I don't have much debt. — Adam Khoo

> [19:32](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1172s) net net what happens if interest rates go up they're like me whatever. — Adam Khoo

> [23:27](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1407s) stop trying to predict the market — Adam Khoo

> [23:27](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1407s) stop trying to predict interest rates. — Adam Khoo

> [23:27](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1407s) bulletproof portfolio that will do well under all market conditions. — Adam Khoo

> [23:27](https://www.youtube.com/watch?v=t9P3BKPndnI&t=1407s) May the markets be with you! — Adam Khoo

## Mentioned Adam Khoo, U.S. 10-year Treasury, Federal Reserve, S&P 500, Paul Volcker, Monster Beverage, Tesco, AutoZone, The TJX Companies, UnitedHealth Group, Starbucks, Snowflake, Cloudflare, IonQ, Stock Oracle, DBS, UOB, OCBC, Arch Capital Group, Allianz, Meta, Alphabet, Apple, Microsoft, Linde plc, Mastercard, Visa, Motorola Solutions, Intercontinental Exchange, Piranha Profits, Wealth Academy

## Video description The U.S. 10-year Treasury yield has surged from around 4.0% to nearly 5.0% over the past 12 months and investors are getting nervous.

Could higher long-term interest rates finally put the brakes on the economy and trigger a major stock market correction? More importantly, are interest rates at a danger level yet?

In this video, I break down what rising bond yields really mean for the economy and stock market, which stocks and sectors are most vulnerable to higher rates, and which businesses are best positioned to withstand or even benefit from the new interest rate environment.

======================== Stock Investing & Trading insights by Adam Khoo will show you profitable trading and investment opportunities in today's stock markets.

These are essential strategies for stock traders and investors who want to improve their investment and trading performance.

Adam Khoo is a professional stock investor and options trader and the best-selling author of 16 books including 'Winning the Game of Stocks" and "Profit from the Panic". Thousands of students have profited from his sharp investment insights into the world of stock market investing and trading. ===================== Sign up for our courses/mentorship programs 📗 Value Momentum Investing: http://bit.ly/4mqrEVP 📙 Options Waverider™: http://bit.ly/4c5xyrR 📘 Price Action Manipulation™ (Trading): http://bit.ly/48FUAmQ 📕 Income Investing™ (Dividends): http://bit.ly/3Ow8CRj

Grab our Playbook Subscriptions Ultimate Investors Playbook™: http://bit.ly/3QiN6zT Options Tactics Playbook™: http://bit.ly/4tCQFPL PAM™ Trader Playbook: http://bit.ly/4mmYnv0 ===================== 💻 Join Our Wealth Academy Live Seminars https://www.wealthacademyglobal.com ===================== 🧑‍🏫 Visit Adam Khoo Learning Technologies Group https://www.akltg.com ===================== Follow Me On Social Media 🌟 Facebook: https://facebook.com/adamkhoosuccess 🌟 Instagram: https://www.instagram.com/adamkhoosuccess/ ===================== Follow Piranha Profits On Social Media 🐟 Facebook: https://www.facebook.com/piranhaprofits 🐟 Instagram: https://www.instagram.com/piranhaprofits 🐟 Telegram: https://t.me/piranhaprofits 🐟 Discord: https://discord.gg/piranhaprofits ===================== 👉 If you've found this video helpful, please LIKE, SHARE, & COMMENT 👉 SUBSCRIBE to my Channel for more Market Analyses & Investing Strategies 👉 Click on the NOTIFICATION BELL to get notified whenever I upload a new video ===================== 💸 MAY THE MARKETS BE WITH YOU! 💸

[Source](https://www.youtube.com/watch?v=t9P3BKPndnI)

中文简报

Khoo：利率符合76年历史常态标普500可承受5%收益率 10年期美债收益率达到5%仍低于76年来5.52%的历史均值，这意味着只要企业盈利增速跑赢通胀，股市就不会崩盘并能持续复合增长。 Adam Khoo论证指出，10年期美债收益率在5%附近徘徊仍完全处于历史常态范围内，并不预示着市场即将崩盘；他指出从历史上看，强劲的企业盈利增长能让股市在高利率环境下依然蓬勃发展。收益率上升通过推高企业债务再融资成本以及提高DCF折现率来传导压力，从而严重压缩未盈利科技公司、REITs和高杠杆周期性企业的估值。相反，现金充裕的超大市值科技股、商业银行、保险公司以及ICE等交易所运营商则不受影响，甚至能从高利率中积极受益。Khoo认为，投资者应放弃徒劳的利率预测，转而构建一个以排名前1%的高现金流复合增长型企业为核心的韧性全天候投资组合。美国10年期国债收益率攀升至近5%，反映了约1.5%的实际GDP增长和约3.4%的CPI通胀这一标准宏观基准，这是由公开市场债务动态决定，而非由美联储直接法令决定。 (0:00) 5%的债券收益率完全符合历史常态，低于76年均值5.52%，接近中位数4.72%；而在过去如1980年代等时期，尽管收益率达到两位数，股市年化回报率仍达到了17.0%。 (5:14) 收益率上升因推高DCF折现率和再融资成本，令未盈利成长型企业、高杠杆周期股和REITs不成比例地承受压力，而现金充裕的成熟复合增长型企业则未受冲击。 (14:58) 金融机构和资产负债表雄厚的超大市值公司是利率上升的天然受益者，它们能获得更高的净息差，并利用现金储备赚取的利息抵消债务利息支出。 (19:32)

Reading summary

Adam Khoo argues that 10-year U.S. Treasury yields approaching 5% align with long-term historical norms and do not inherently threaten a stock market crash, provided corporate earnings continue expanding. Rather than relying on interest rate forecasts, Khoo contends investors should insulate portfolios by targeting cash-rich, highly profitable businesses while avoiding debt-burdened and unprofitable assets. Macro Drivers and Historical Context of Bond Yields (0:00) The 10-year Treasury yield is determined by open-market supply and demand rather than direct Federal Reserve decree. Khoo explains that the yield fundamentally tracks a baseline of real GDP growth combined with inflation; for instance, a 1.5% real GDP growth rate and a 3.4% CPI inflation rate roughly produce the current 4.9% yield level. While yields near 5% appear elevated compared to the pandemic-era trough of 0.7% in 2020, a 76-year perspective dating back to 1950 reveals a historical mean of 5.52% and a median of 4.72%, with yields peaking at 15.6% in 1981. Historical returns demonstrate that equities can generate substantial gains during periods of elevated yields. During the 1980s, when the 10-year yield averaged 10.6%, the S&P 500 achieved a compound annualized growth rate of 17.0%. Conversely, the 2000s produced negative index returns despite a moderate 4.5% average yield due to the dot-com crash and the 2008 financial crisis, illustrating that market trajectory is decoupled from absolute rate levels alone. Valuation Transmission Channels and the Role of Earnings (2:20) Rising long rates affect equities through corporate borrowing costs and discounted cash flow valuation rates. Higher bond yields raise refinancing and borrowing expenses, compressing operating margins for debt-laden companies. Simultaneously, an increased discount rate reduces the present value of future corporate earnings. This adjustment disproportionately penalizes speculative, unprofitable companies whose anticipated cash flows sit 5 to 10 years away, whereas mature firms generating robust current cash flows experience far less present-value erosion. Khoo emphasizes that rising yields do not automatically trigger bear markets; the core variable is whether rate increases are driven by accelerating inflation or underlying economic expansion. If yields surge because of persistent inflation while corporate earnings stall, valuations experience severe downward pressure. However, if yields drift higher alongside durable corporate earnings growth, equities historically advance in tandem with rising bond yields. Vulnerable Sectors: Speculative Growth, REITs, and Cyclicals (14:58) If long rates push toward 5% or 6%, specific asset classes face pronounced operational headwinds. The most exposed group includes unprofitable growth and tech companies, such as Snowflake, Cloudflare, and IonQ, whose ongoing net losses leave their valuations acutely vulnerable to higher discount rates. A second vulnerable group comprises Real Estate Investment Trusts and utility providers, which rely heavily on debt financing to acquire assets. Elevated borrowing costs diminish their distributable net income and force dividend reductions. Highly leveraged cyclicals—including airlines, telecommunications providers, cable networks, and property developers—form a third vulnerable category. Because these entities carry substantial debt loads on their balance sheets, elevated interest servicing costs directly erode profit margins and suppress share performance. Beneficiaries, Resilient Compounders, and Portfolio Construction (19:32) Conversely, several sectors benefit from or remain largely insulated against elevated rates. Commercial banks—such as Singapore-based DBS, UOB, and OCBC—expand net interest margins, while insurance firms like Arch Capital Group and Allianz reinvest premium floats at higher risk-free yields. Cash-rich technology enterprises like Meta, Alphabet, Apple, and Microsoft earn substantial interest income on liquid balances, which effectively offsets debt service. Other beneficiaries include financial infrastructure operators such as Intercontinental Exchange, which gains from widening customer margin interest and heightened hedging volume across energy derivatives. Khoo points out that disciplined stock selection allowed top-tier compounders like Monster Beverage, AutoZone, and UnitedHealth Group to generate substantial gains during the broader index stagnation of the 2000s. Because macroeconomic consensus repeatedly fails—as seen when Wall Street forecasts for multiple rate cuts in early 2024 yielded zero cuts—Khoo argues against rate speculation, recommending investors maintain an all-weather portfolio anchored in high-return, low-debt businesses. Khoo concludes that long-term Treasury yields hovering around 5% remain within historically normal boundaries and do not warrant market panic. However, this assessment relies on the premise that corporate earnings will continue to grow; a scenario where inflation forces yields past historical ranges toward 7% to 9% while corporate earnings stagnate remains the critical unresolved threat.

Source quotes

[2:20] Adam Khoo: Interest rates go up, I don't care. I don't have much debt. [19:32] Adam Khoo: net net what happens if interest rates go up they're like me whatever. [23:27] Adam Khoo: stop trying to predict the market [23:27] Adam Khoo: stop trying to predict interest rates. [23:27] Adam Khoo: bulletproof portfolio that will do well under all market conditions. [23:27] Adam Khoo: May the markets be with you!

Original transcript

[0:00] Long-term interest rates keep going up. [0:02] Specifically, the 10-year Treasury yield [0:04] is now going to touch 5% very soon. And [0:07] so, people are worried, would this crash [0:09] the stock market? And which type of [0:11] stocks are most at risk? And which type [0:14] of stocks are the most immune? And how [0:15] can I position my portfolio moving [0:18] forward? Well, let's find out in this [0:20] video. [0:30] A lot of people are getting freaked out [0:32] because the US 10year Treasury yield or [0:34] the US 10ear government bond yield has [0:37] been going up significantly in the last [0:39] couple of months because of high [0:41] inflation and because of the war and oil [0:44] prices and in fact now you can see uh [0:46] for the last year or so it's it's gone [0:49] down initially but now it's really gone [0:51] up and now it's kind of like reaching uh [0:54] almost touching 5% again. So people are [0:58] worried. So when a 10year Treasury yield [1:00] goes up, how will that affect the stock [1:02] market and what stocks in particular are [1:04] most at risk? So the first thing to [1:06] understand is what affects the 10-year [1:09] Treasury yield. Now the 10-year Treasury [1:12] yield is also known as the long rate. It [1:14] is long-term interest rates. Remember [1:16] that the Federal Reserve, they cannot [1:19] control the long-term interest rate. [1:20] they can only control the short-term [1:22] interest rate called the fed funds rate [1:24] which are they are thinking of raising [1:25] rates in the next couple of meetings [1:28] right but the long rate is determined by [1:30] the demand and supply of US government [1:33] bonds [1:34] now in a nutshell the long-term rate is [1:38] determined by roughly uh inflation [1:42] inflation [1:44] plus uh real GDP growth so inflation [1:47] plus real GDP growth gives you roughly [1:50] the 10ear year treasury yield. Like for [1:52] example, um in quarter 2 2026 this year, [1:56] real GDP came in at about 1.5%. [2:00] And the most recent CPI inflation index [2:05] headline came in at 3.4%. [2:08] So if you add inflation 3.4% to GDP [2:11] 1.5%, what do you get? you get 4.9% [2:16] which is ta where we are right now with [2:19] the 10-year Treasury yield. So as an [2:21] investor you may be wondering what has [2:23] this long-term interest rate got to do [2:26] with me? How does it affect the stocks I [2:28] own? It affects your stocks in two ways. [2:31] Number one, this long-term interest rate [2:35] affects the borrowing cost of stocks or [2:40] companies, right? So remember that when [2:42] you own stocks, you you own businesses. [2:45] So for businesses who have a lot of [2:47] debt, a lot of borrowings, what happens [2:50] when the interest rate goes up? They [2:52] have to pay more interest on their [2:54] bonds, on their debt. When they pay more [2:56] interest, their expenses go up, their [2:58] profits go down. When their profits go [3:00] down, the intrinsic value of the stocks [3:02] go down. So that's the first thing. It [3:05] affects borrowing cost. [3:08] So which companies are the most [3:09] affected? the ones with the most debt. [3:12] That's why I keep saying when you invest [3:13] in companies, stay away with the stay [3:16] away from the ones with the most debt [3:18] because when rates rise, they get hit [3:20] the most. But companies that have got [3:22] little or no debt is like, who cares? [3:25] Interest rates go up, I don't care. I [3:27] don't have much debt. All right, we'll [3:29] talk more about that in a while. The [3:31] second thing is that the long-term [3:32] interest rate affects what we call the [3:34] discount rate. the discount rate used to [3:38] value a company's future cash flow. So [3:42] remember that how do you calculate the [3:44] intrinsic value of a company? The [3:47] intrinsic value is the present value of [3:50] all the future cash flow which you you [3:53] discount using a discount rate. Now the [3:56] discount rate is affected by the 10year [4:00] treasury yield. So when a 10-year [4:02] Treasury yield goes up, the discount [4:04] rate goes up. So for companies that [4:08] don't make money now, they are [4:10] unprofitable now, but they'll make money [4:12] in 5 to 10 years. The cash is in the [4:14] future. So all the cash in the future, [4:17] when you discount to present value using [4:20] a higher discount rate, what happens? [4:22] You get less money today. So it causes [4:24] the intrinsic value of these companies [4:26] to drop a lot. Okay? But for companies [4:29] that make a lot of money now already, [4:32] right, this doesn't affect them as much [4:34] because they already generate a lot of [4:35] cash today. So it is companies that [4:37] generate cash cash in the future that [4:39] are unprofitable today that get hit the [4:42] most. So later I'll talk about what are [4:44] the categories of stocks that are most [4:46] at risk of this and which kind of stocks [4:49] that you can own or I own that are most [4:51] most immune to this. So in a nutshell, [4:54] companies that are that are most immune [4:56] to this going up are companies with low [4:58] debt and companies that are very very [5:01] profitable, which are mainly the [5:03] companies I buy anyway. So because of [5:05] that, I don't really care if the 10ear [5:08] yield goes up. Who cares, right? You [5:10] should only be concerned if you got [5:12] companies that don't make money and [5:13] companies with a lot of debt. Now the [5:15] next thing to ask is uh at 4.9% [5:20] going to maybe 5% or even 5.5% is that [5:23] considered high? Now to many people it [5:26] looks really high because the long-term [5:29] interest rates were initially at 0.3%. [5:34] Just a couple of years ago. So relative [5:36] to the recent years, it looks bloody [5:38] high, right? But if you look back in [5:42] history, the longerterm history, I can [5:44] tell you that the current rate of close [5:46] to 5% is actually normal. It's actually [5:50] average. Okay. So, let's take a look at [5:53] this chart. And this chart shows you the [5:56] S&P 500 [5:59] versus the 10-year Treasury yield since [6:02] 1950. So, this shows you the last 76 [6:06] years. Okay? So you know that in the [6:08] long run over 70 years the stock market [6:12] always goes up as you can see driven by [6:15] earnings growth and at the bottom you [6:18] can see the 10-year Treasury yield. So [6:21] you can see that in the last 76 years [6:24] where was the highest yield? The highest [6:27] was here. My god in 1981. [6:31] Okay 1981 the 10ear yield was uh 15.6%. [6:36] 6%. Yeah, it was actually there. Okay. [6:41] And the lowest yield was during COVID [6:44] back in 2020, the lowest yield recorded [6:47] was 0.7%. [6:49] So that was the high of the 70 years. [6:52] That's the low of the 70 years. So if [6:54] you take the average of the last 76 [6:57] years, what's the average? Okay. Well, [7:00] the answer is actually here. [7:03] Okay. The average [7:06] of the last 70 plus years is actually [7:11] 5.52%. That's a long run 10-year [7:14] Treasury yield average. That's the mean [7:16] or the average. The median is 4.72%. [7:21] Okay. So, if I plot this 5.52 [7:26] on this long-term chart, uh it is [7:29] roughly about this green line over here, [7:31] right? That that's the mean for 70 [7:32] years. So in other words, where's the [7:34] 10ear yield today? [7:37] It is just below the long-term average. [7:42] So if you look at the long history, is [7:44] it high? No. Is it low? No, it's just at [7:49] the center. So has a 10-year Treasury [7:51] yield gone to a level where we should [7:53] freak out? No. It is at the normal [7:56] level. Now, of course, if it keeps going [7:58] up to 6 7 8 9%. That could be a problem [8:02] for certain kind of stocks and for other [8:04] kind of stocks, who cares, right? So, [8:06] we'll talk about it in a while. Why it [8:09] is really important to ensure your [8:10] portfolio is well diversified in such a [8:13] way that even if the long rates keep [8:14] going up, there'll be certain stocks in [8:16] your portfolio that will do very well [8:19] and would offset the short-term drops in [8:21] the stocks that may be the most [8:23] sensitive to longer longerterm interest [8:26] rates. So, I'll talk about that in a [8:27] while. Right? So if you look at history [8:31] um how high did rates go before the [8:35] stock market got affected? Yeah. So let [8:38] me show you the next chart. So in the [8:39] next chart divides the last 706 years [8:43] into decades. So these were the 1950s, [8:46] 1960s, 1970s, 80s, 90s, 2000, 2010, [8:51] 2020, right? So each of this is a 10ear [8:55] period. And during each of these [8:58] decades, you can see the average [9:01] 10-year yield during the decade and the [9:04] S&P 500 total return annualized. C AGR [9:10] means the compounded annualized growth [9:12] rate. So for example, in the 1950s, uh [9:15] the average 10-year yield was 3.2%. [9:18] which was uh considered postwar boom low [9:22] inflation and the S&P 500 gained 19% [9:26] annually. [9:28] One of the most bullish decades in [9:31] history, right? Then you can see the [9:33] 1960s the average yield was 4.7%. And [9:36] the annualized return of the S&P was [9:39] 7.8%. Uh this was a time of rising [9:42] inflation like now. Okay, so very [9:45] similar and 1970s uh this was the oil [9:49] shock and uh the 10ear yield went up [9:51] 7.5%. [9:53] This is the average of the decade this [9:55] was 10.6%. So this was really high right [9:58] but did a stock market end I mean did [10:01] the stock market lose money? Well of [10:03] course there were down years they were [10:05] up years but [10:07] uh in totality you can see the 1970s did [10:10] generate an annualized return of 5.9%. [10:13] Of course, it's not as high as the rest [10:16] of the decades, but it was still [10:18] positive and it was still beating [10:19] inflation, right? Uh 1980s, interesting. [10:23] In the 1980s, that's when I grew up. I [10:25] was I was a teenager, right? In the 80s, [10:28] the average 10ear yield was 10.6%. [10:32] That's like more than double where it is [10:34] today. And yet, the S&P gained 17% [10:39] annually. Again, one of the best decades [10:42] in history. All right. So where are we [10:44] where are we today? We are in the middle [10:47] of the 2020s 2026 right and so far our [10:50] average yield is 3.1%. [10:52] And so far for the first 6 years our [10:55] annual return of the S&P 500 is 15.5%. [11:00] Now this was the worst decade the 2000s. [11:02] Why? Because in this decade you had the [11:04] dotcom crash and global financial [11:06] crisis. You had two major crashes and [11:10] the average yield was 4.5%. And of [11:13] course that was known as a lost decade. [11:15] People are always afraid of this. What [11:16] if there's another loss decade? What if [11:18] the next 10 years it's it's negative? It [11:22] could happen. But here's the interesting [11:24] thing. During this loss decade where the [11:27] S&P went negative in 10 years, did all [11:32] the stocks go negative? No. In fact, [11:34] during the lost decade, great companies [11:38] that generated consistent revenue, [11:40] profits, and cash flow, which are the [11:42] kind of companies I buy, they in fact [11:45] did very well during the last decade. [11:47] So, for example, let me show this chart [11:48] to you. I've shown it to some of you [11:50] before in my previous webinar, but let [11:52] me show it to you again. Um, so this was [11:56] the last decade [11:58] [clears throat] where the S&P started [12:00] here in 2000 with a.com crash, [12:03] recovered, and then global financial [12:05] crisis recovered and it was back to [12:08] here. So, can you imagine if you held [12:10] the S&P 500 for 10 years, you went [12:14] nowhere, right? But if you held on to [12:17] individual companies that again had [12:20] consistent growing revenue, profits, [12:22] cash flow, wide economic mode, which are [12:25] the kind of companies that I buy, the [12:26] top 1%, they did very well during the 10 [12:29] years. Example, these are the companies. [12:32] So again, during the lost decade 2020, [12:36] S&P goes nowhere. Monster went up [12:39] 18,000% during that decade. Tesco went [12:42] up 3,900%. [12:44] Autozo went up 1,400%. [12:47] TJX 1,100%. [12:50] United Health went up 690%. Starbucks [12:53] went up 587%. [12:55] Now, am I saying that these exact same [12:57] stocks will do very well if we have [13:00] another loss decade? No, I'm not saying [13:02] that these stocks were good during that [13:05] time, but some of them may not be good [13:09] now. So you have to look at what are the [13:11] top 1% of companies today. Which are are [13:14] the companies today with the most [13:15] consistent growth in revenue, income and [13:18] cash flow. Which are the companies with [13:19] the lowest debt? Which are the companies [13:22] with the strongest economic modes? Which [13:24] are the companies with the highest [13:25] return on equity, return on capital? And [13:28] you invest in those, which is what I [13:30] primarily invest in. So that's why for [13:33] me I'm not afraid of the loss decade [13:34] because I know that even if the market [13:36] goes nowhere in the next 10 years, my [13:39] stocks will do very well because I only [13:41] buy the most profitable of the stocks. [13:45] So that's the one thing to understand. [13:46] So going back to this chart again, what [13:48] can we learn from this? What we can [13:49] learn is that high 10year yields [13:53] don't mean that the market has a [13:55] negative return. Again, uh on the [13:58] contrary, this high 10ear yield gave one [14:02] of the best 10-year returns in the [14:05] market. Okay. So, it's not just whether [14:08] the yield is high. Now, what's more [14:09] important is is the yield going up very [14:13] fast. Number one is the speed of the [14:15] rise, but number two, why is the yield [14:17] going up? Now remember, if the yield [14:20] goes up primarily because of inflation, [14:25] but the company's earnings are flat or [14:28] declining, that's no good. Then the [14:30] market could indeed go into a correction [14:32] or bare market. But if the 10ear yield [14:36] is going up in this case but corporate [14:39] earnings are growing significantly which [14:42] is what we are seeing in the last few [14:44] earnings results then the stock market [14:47] can go up [14:49] while the 10year treasury yield goes up [14:52] as well. So is the reason for the rise [14:54] and not just the rise and the level [14:56] itself. So let's answer the next [14:58] question. If the long-term rate keeps [15:00] going up to, you know, five, 6% or so, [15:04] which stocks in your portfolio must you [15:06] watch out for? Which stocks could get [15:07] hit the most negatively and which stocks [15:10] in your portfolio will be the most [15:12] immune to it as it and it's important to [15:15] know this because if currently your [15:16] portfolio has many stocks that are [15:19] sensitive to long-term interest rates [15:21] going up, then you got to diversify [15:23] more. Okay? But if your portfolio [15:25] already has many companies that are [15:27] immune to long-term interest rates, then [15:29] you can rest more easy even if rates go [15:32] higher. So the stocks that are the most [15:34] vulnerable to rising long-term rates are [15:37] number one unprofitable growth and [15:39] emerging tech stocks. Why? Because again [15:42] many of these companies they don't make [15:44] money now. They make money in the [15:46] future. So when the discount rate goes [15:48] up and you discount the future cash flow [15:51] to present value, the intrinsic value [15:54] drops significantly because of higher [15:56] discount rates. So what are examples of [15:58] these kind of companies? Companies that [16:00] are not making money now but are what we [16:02] call emerging tech. So companies like [16:04] your snowflake, companies like [16:06] Cloudfare, companies like ion which is a [16:09] nuclear company, right? Also not nuclear [16:11] company, it's a quantum computing [16:12] company. Why? Because they don't make [16:14] any money. Okay? And it's very easy to [16:16] check because you can go to any [16:17] financial website you want. I like to go [16:19] to stock oracle. And again, you know, [16:21] just take a look. If you look at [16:22] Snowflake, for example, uh straight [16:24] away, you can see that they are not [16:26] making money right now. Uh their [16:28] profitability, if you click on uh over [16:31] here, their financials, you can see, [16:35] yep, they are still losing money. Okay. [16:38] And what else? Uh Cloudfare, ticker [16:41] symbol NE, [16:43] same thing. They are not making any [16:45] money right now. Go to financials. [16:49] Check again. Yeah, they are still losing [16:52] money. What's the other one I mentioned? [16:53] Ion Q, right? Ion Q. Uh, again, [16:58] they are not making money. [17:02] Quantum computing is not making money. [17:03] Again, you can see straight away [17:05] profitability is low. You can see from [17:07] the Oracle IQ chart under financials, [17:10] you can see again losing money. Okay. [17:12] So, they will be hit the hardest if [17:15] long-term interest rates go up. What [17:18] else? The second thing will be that will [17:20] be hit hard which have already been hit [17:21] in fact are REITs, real estate [17:23] investment trusts and utility companies. [17:26] Why? Because REITs and utility companies [17:29] they take on a lot of borrowings in [17:32] order to finance their infrastructure [17:35] and finance their real estate. So as [17:37] rates go up or stay higher for longer [17:41] uh the their interest expense goes up [17:44] they pay more interest on their debt and [17:46] so their income drops the dividends they [17:49] pay drops and the share price drops and [17:51] that's why many REITs have been coming [17:53] down quite a bit in the last couple of [17:55] weeks because of the long-term rate [17:57] going up. So REITs are affected right [18:00] for me. Do I own REITs? Yes, I do. I own [18:02] Singapore REITs in my dividend portfolio [18:05] and yes, they have been going down in [18:07] the last couple of months, but my [18:09] portfolio is still up. Why? Because it [18:11] is hedged by my big holdings of [18:14] Singapore banks. More than half my [18:16] dividend portfolio are in Singapore [18:18] banks. And later I'll show you that [18:20] banks benefit from rising long-term [18:23] interest rates. That's why it's [18:24] important that your portfolio is well [18:26] hedged. So my REITs go down, my banks go [18:28] up, they are well hedged, right? But if [18:31] you have all reads then you're screwed [18:33] for example. Okay. So you got to [18:35] balance. Yeah. Uh the next which are [18:37] negatively affected would be highly [18:39] leveraged cyclicals. So first of all [18:42] what are highly cyclical businesses? [18:45] These are companies like airlines [18:47] like telos like commodity companies like [18:51] property developers. [18:54] But the commodities actually do well in [18:56] a high inflation rate environment. So [18:57] let's put commodities aside. Right. [18:59] Okay. Say it again. Telos, uh airlines, [19:03] um cable companies, you have got um uh [19:07] property developers for example. So [19:09] these are highly cyclical and these kind [19:11] of companies again they usually have a [19:13] lot of debt on their balance sheet. So [19:16] when they've got a lot of debt, what [19:17] happens? Interest rates rise, they pay [19:18] more interest, income drops, stock price [19:20] drops. Very simple. So you want to [19:22] ensure that your portfolio you don't [19:25] have too much allocation in these three [19:28] areas. Yeah. Now, what kind of stocks [19:32] will benefit from higher rates or at [19:34] least be neutral to it? Number one, [19:37] banks and insurance companies. They'll [19:39] do really well. So, those of you who [19:41] hold banks, like I hold uh DBS, OB, [19:45] OCBC, which are Singapore banks, they [19:47] make up more than half my portfolio. [19:49] They've been doing really well because [19:50] as long-term interest rates go up, their [19:52] net interest margin rises. Okay. [19:56] insurance companies also do very well. [19:59] So for example, in my capital gains [20:01] portfolio, I hold Arch Capital, ACGL. [20:05] Uh, another one that's doing really well [20:07] is actually Alliance, which [20:09] unfortunately I don't own. I wish I did [20:11] own it. Alliance is listed on the [20:14] Frankfurt Stock Exchange. It's one of [20:15] the biggest life insuranceers. Why? When [20:18] interest rates go up, life insurance [20:20] companies can invest their float at [20:23] higher rates and earn more income. Yeah. [20:25] So, make sure your portfolio has banks, [20:28] has insurance companies if you think [20:31] long rates are going to go higher [20:32] because these will do really well for [20:34] you. Okay. Next are cashrich mega caps. [20:40] So, if rates go up, how [snorts] will [20:43] Apple, Meta, Google and Microsoft cope? [20:48] They will be fine. They will be fine. [20:51] Why? Because if you look at for example [20:54] Meta and Google specifically especially [20:56] right Meta and Google you may have read [20:59] that oh they take they're taking on a [21:00] lot of debt right to build their data [21:02] centers. So all this debt they have to [21:05] pay interest on the debt correct but [21:07] what they don't show you and what you [21:09] need to check is that they have a lot of [21:11] cash and equivalents [21:13] where it's earning interest income and [21:16] the interest income they earn [21:20] offsets the interest expense that they [21:22] pay. So net net what happens if interest [21:25] rates go up they're like me whatever. [21:28] Okay. So, rates go up, companies like [21:32] Apple, Meta, uh Microsoft, and Google, [21:36] uh they'll be fine, you know, because [21:38] they don't have much net interest [21:40] expense on their debt. Okay? So, I hold [21:43] a lot of them and I I'm pretty [21:45] comfortable. Okay. The other group that [21:48] will do very well as rates rise because [21:50] normally rates rise with inflation are [21:53] energy and commodity companies. You can [21:55] see that this year energy stocks are [21:57] doing very well, commodity stocks are [21:59] doing very well. But as you guys know, I [22:01] don't invest in this group because uh [22:04] long run they tend to underperform the [22:06] S&P and they tend to be highly volatile. [22:08] But certain years they do very well, [22:10] certain years they don't do very well [22:11] because it all depends on what oil [22:14] prices [22:15] as well as natural gas prices as well as [22:19] uh like copper prices which I can't [22:20] predict seriously. Yeah. Uh finally [22:24] short duration value stocks. So in other [22:27] words, companies that are mature are [22:30] very profitable. [22:33] They are also uh less affected by [22:36] long-term interest rates going up [22:38] because they're already very profitable [22:39] today. So companies like your uh Lind uh [22:43] plc which I own, companies like uh [22:45] Mastercard, like Visa, like Motorola, [22:49] like uh did I mention Visa already? [22:52] Yeah, I did. Right. Getting old. Uh [22:54] companies like uh Intercontinental [22:56] Exchange. Oh, especially [22:58] Intercontinental Exchange, which I own [23:00] ICE, they benefit from rising rates, [23:03] right? Why? Because they earn uh they [23:08] earn margin interest. So rates rise, [23:10] they earn more interest on margins that [23:13] they extend to customers. Number one. [23:16] Number two, they are very big in the [23:18] trading of energy futures. So as energy [23:21] prices go up, people trade more energy [23:23] futures, they do very well. So [23:25] intercontinental exchange, right? So one [23:28] of the keys again I would say to be a [23:31] consistently profitable investor [23:34] is not to predict the market because no [23:36] one can predict the market with any [23:39] certainty. No one can predict interest [23:42] rates with any certainty. If you recall [23:44] at the start of this year and at the end [23:47] of last year, what did everyone predict? [23:48] They predicted that this year they they [23:51] were going to cut interest rates three [23:52] to four times, right? Remember that. [23:55] What happened? No interest rate cut. In [23:57] fact, now they're talking about rising [23:58] interest rates. So, no one can predict [24:01] interest rates. Not even the Federal [24:03] Reserve can predict the long rate. So, I [24:05] always say stop trying to predict the [24:07] market. Stop trying to predict interest [24:09] rates. Instead, build a resilient, [24:12] bulletproof portfolio that will do well [24:15] under all market conditions. Okay? So, I [24:18] hope this has been a useful video. Don't [24:20] freak out about the long rate going up. [24:22] At least not yet. All right, we're still [24:24] in a uh we are still in a normalized [24:27] zone. Yeah. So, thank you for listening [24:28] and as always, may the markets be with [24:30] you and subscribe to the channel if you [24:32] have not already done so. If you want to [24:33] catch my latest videos, click on the [24:35] subscribe button right now. Click on the [24:38] bell so you get instant notifications [24:39] once I upload my latest video. If you [24:42] want to check out my online courses, go [24:44] on to piranhaprofits.com [24:46] where you're going to learn how to [24:47] invest and how to trade the financial [24:49] markets and create an income from all [24:51] around the world. If you want to join my [24:54] live Wealth Academy program, go on to [24:57] wealthacademy global.com and find out [24:59] more about how you can learn investing [25:00] and trading live online. This is Adam [25:03] Coup and may the markets be with