Wall Street Flags Inflation Repricing Risk as Treasury Yields and Oil Climb

BlockBeats reports that on May 18, with U.S. stocks still trading near elevated levels, major Wall Street firms cautioned that investors may be underpricing inflation and rate risks. The move in the 30-year U.S. Treasury yield above 5% and the 10-year yield above 4.5% has revived concerns that higher discount rates could weigh on risk-asset valuations. Analysts said global crude prices have stayed above $100 a barrel since tensions escalated among the U.S., Israel and Iran. Growing worries over a prolonged disruption in the Strait of Hormuz are adding to fears of another inflation shock. Capital Economics said markets have yet to fully reflect an extreme scenario in which the strait faces an extended blockade. While enthusiasm for AI-related investment and solid corporate earnings continue to underpin U.S. equities, some institutions note that the S&P 500’s forward P/E has climbed to 21.3x, well above its long-run average. With bonds leading a renewed inflation repricing, equities could come under pressure from both stretched valuations and tighter liquidity conditions.