May 7, 2026
By Peter Bower
Interest rates mean more to the stock market than the Iran War, Ukraine, and private credit concerns combined. Oil prices feed into inflation, so indirectly they affect interest rates, too. Interest rates are one thing that can derail our bull market. There are others, of course, but this is the big one. The level of interest rates reflects investors’ desire to get a fair return above inflation. No one wants to lend money and get back less than they loaned.
The U.S. had an inflation problem before the Iran War. It had been tracking around 3%, but now it is probably higher due to the pressure from higher energy prices. There are offsets from productivity improvement due to the implementation of artificial intelligence. Whether this will be enough is yet to be seen.
Levels to watch on the U.S. Treasury 10-year bond is 4.5%, and on the 30-year it is 5%. Rates much above these levels could damage economic growth. Even worse, they may require rate hikes from the Federal Reserve. Investors are not prepared for this. So far, we are skating near but below these levels. The Bull and his partners are paying attention. In the meantime, stay steady my friends.
-The Lonely Bull
