Cathie Wood, CEO of ARK Invest, believes that stock markets can continue to grow despite 10-year Treasury yields exceeding 5%. According to her, higher rates indicate that the market is operating without strict control from the Federal Reserve (Fed). Wood noted that her comments are based on a chart by Frank Downing from ARK, which displays yields and the S&P 500 index since 1980. Currently, the 10-year bond yield is 5.18%, and the S&P 500 index is– 7743. She wrote on X that during the rate period from 0.5% to 2%, “the market was not functioning.” Today, in her view, the market is functioning again. Wood cited 2017 as an example, when the Fed raised rates, but stocks with long-term investment appeal performed well.
In her investment note dated September 22, 2026, Wood also conducted an analysis based on 230 years of data, asserting that the rate decline from 1981 to 2021 was anomalous. Before the Great Depression, yields of 5% to 6% were considered normal. Wood expects long-term yields to approach 5%–6% as productivity and the economy grow due to technological changes. She also predicts short-term rates to rise to 6%–8% in line with nominal growth. Meanwhile, Wood claims that data shows lower inflation than official figures. For example, the independent tracker Truflation estimated inflation at 2.5% based on original data, while the government’s Personal Consumption Expenditures (PCE) index was 3.7%. In her opinion, balanced portfolios could have a larger share of stocks than the classic 60/40 ratio. Anshul Sehgal from Goldman Sachs similarly suggested favoring AI over bonds.
However, not everyone shares her optimism. Michael Contopoulos from Janus Henderson warned that the market is approaching its ceiling as Fed rate hikes increase yields. Traders are also assessing the possibility of a Fed rate hike in October, which could negatively impact risky assets, including Bitcoin. Determining whether earnings can grow faster than borrowing costs will be a key question. Wood is currently betting that higher rates and higher stock prices can coexist.
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