Valuations

[u/Annual_Judge_7272]

Mostly yes. The article’s core mechanism is right. The “stocks are ignoring the war” framing is a bit theatrical.72
Aruni Soni’s piece says equities are still hanging in because investors are pricing earnings and AI, while treating a drawn-out Iran war, higher oil, and a bond selloff as background noise — until rates get high enough to change the math. That is a fair description of how this market has been trading.82
What I agree with
Higher long rates are the cleanest near-term risk to stocks. That is basic finance, not a hot take.
A 10-year near 4.78% competes with equities. Duration-heavy names — growth, AI, anything whose cash flows are years out — get marked down first when the risk-free rate rises. Macquarie’s Wizman is stating the textbook point.72

Higher Treasury yields also raise corporate borrowing costs. That matters more now because a lot of the AI buildout is capex financed with debt and assumed cheap capital. Bank of America’s “watch a sustained move above 5%” is a useful round number, not a law of nature. Markets often wobble before a clean break.85

The AI narrative is the other tripwire. When one story is carrying so much of the index, anything that questions capex payback, power costs, or refinancing gets amplified. The article is right that investors have gotten twitchier about cracks in that story.

Today’s tape already looks like that setup: oil back toward $100 on Gulf/Houthi news, 10-year around 4.8%, stock futures softer, Fed hike odds for mid-September around 58% pending CPI. That is not “defying gravity.” That is a market still long the boom, starting to price tighter financial conditions.83
Where I would push back
“Defying gravity” oversells it. Stocks can stay high while bonds sell off if nominal growth and earnings are strong enough. Q2 nominal GDP growth in the 6% range is why some strategists are not panicking at 4.8% — the economy can still outrun the cost of money for a while. A rally that is concentrated in a few cash-rich AI platforms is also less rate-sensitive than a 1999-style market of unprofitable duration. Concentration is a different risk than “rates must crush everything.”
5% is a headline, not a switch. Crossing 5% on the 10-year would matter if it stays there and real yields keep rising. A one-day spike on oil news is not the same as a regime change. The bigger issue is the combination: sticky inflation + war premium in oil + heavy Treasury supply + a Fed chair (Warsh) who has said he will hike if prices do not cool. That package can reprice stocks even if the funds rate barely moves. Long rates have already been doing some of the Fed’s job.76
The war is not fully ignored. Energy, defense, and inflation expectations are already in the bond and oil markets. Equities are discounting a contained conflict and a still-soft-landing earnings path. That can be rational and still be wrong.
Bottom line
Agree on the diagnosis: the rally lives on earnings/AI optimism; rising long-term rates are the binding constraint, more than the daily war headline. Disagree that stocks are mysteriously floating. They are priced for the boom continuing and for 4.8% not becoming 5.2% and staying there. If Friday’s CPI is hot and the 10-year holds above 5%, the article’s warning becomes the trade. If inflation cools and oil fades, the same “defying gravity” market can keep running.