BofA head of US equities and quant strategy Savita Subramanian said bonds are,
for the first time in decades, a genuinely competitive alternative to equities.
With the US 10-year yield above 5%, BofA’s valuation model indicates the S&P
500’s annualized return over the next 10 years may be lower than current
Treasury yields. She warned high investor sentiment raises equity downside risk
and limits further upside. Policymakers, including the Fed and the US Treasury,
are monitoring the long end to avoid too-large increases in long-term rates;
demographics and potential AI-driven disinflation imply a lower long-term
ceiling for US rates than in the 1970s–80s, making sustained Treasury yields
above 6–7% unlikely and improving the case for bond allocations.
