Why Own Stocks When Treasuries Yield 5%?
10-year Treasury yields breached 5%, and it’s all anyone can talk about. And with good reason—interest rates matter. A lot.
Rather than trying to predict the next market move, let’s get the expert opinion of Five Investors on Investing in the 5% World.
Sorry, that article is a bit outdated. It was written almost exactly three years ago.
Instead, we’ll turn to Six Investing Pros Weigh In on Surging Yields—and How to Trade Them.
Nearly three years ago, investors were asking what a 5% Treasury yield meant for their portfolios. Today, with the 10-year Treasury once again above 5%, we’re asking many of the same questions.
But something important happened between those two articles.
The S&P 500 returned roughly 20% per year.
That doesn’t mean interest rates didn’t matter. It means they weren’t the only thing that mattered.
Rates affect valuations, borrowing costs, capital allocation, and the relative attractiveness of nearly every investment. But markets ultimately reflect a much larger equation—one that includes earnings, economic growth, inflation, productivity, investor expectations and, perhaps most importantly, what actually happens compared with what investors had already priced in.
If we look back at the experts from 2023, we’ll find forecasts that were right, some that were wrong, and some that were directionally right but led to very different investment outcomes than we might have expected.
The only forecast I’m comfortable making is that the 2026 cohort will have similarly mixed results.
Yet investors are asking essentially the same question in 2026 that they did in 2023:
“Stocks or bonds at a 5% risk-free rate?”
I think there are better questions:
How much income does this portfolio need to produce?
When will the money actually be needed?
Which liabilities or spending needs can now be matched with attractive fixed-income yields?
How much liquidity needs to be available regardless of what markets do next?
Which assets need to provide growth over the next 10, 20, or 30 years?
Imagine two investors looking at exactly the same 5% Treasury yield.
A 63-year-old business owner selling a company next year and needing $500,000 annually from a portfolio has a very different reason to care about 5% bonds than a 40-year-old couple with substantial income and essentially no need to touch their investment portfolio for 15 years.
The market environment is identical. Their portfolios probably shouldn’t be.
It’s tempting to construct portfolios around a forecast:
Rates Are High
Bonds Look Attractive
Reduce Stocks
Planning-driven portfolio construction starts somewhere else:
"We need $X of liquidity, $Y of annual income, and $Z of long-term growth. What combination of assets gives us the highest probability of accomplishing those objectives?"
Interest rates still matter. In fact, at 5%, they may meaningfully change the answer.
But they become an input into the equation rather than the answer itself.
A portfolio shouldn't be a collection of predictions about what happens next. It should be a collection of assets designed to accomplish specific things for the people who own them.
This commentary is provided by Chagrin Valley Legacy Advisors a registered investment advisor. The information is presented for general informational and educational purposes. Registration does not imply regulatory endorsement or a particular level of skill or training. This material is not personalized investment advice or a recommendation to buy or sell any security. Investing involves risk, including loss of principal, and no portfolio strategy guarantees that income, liquidity, or growth objectives will be achieved. Treasury securities are backed by the full faith and credit of the U.S. government, but their market value can decline before maturity, and inflation can reduce purchasing power. Yields and market conditions change. Hypothetical examples are illustrative only and do not represent actual clients or investment results. Past performance does not guarantee future results. Third-party articles are provided for context and do not constitute endorsements of Chagrin Valley Legacy Advisors.
